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Iraq and Kurdistan Regional Government agree on oil payment

Genel Energy to benefit from dispute resolution

In November 2011, the Turkish company Genel Energy International Ltd merged with Vallares PLC to become the largest oil and gas company operating in the Kurdistan region of Iraq.

Renamed Genel Energy, the new company enlisted the London Stock Exchange (GENL).

For both companies the purpose of this merger was to reinforce their position in the Kurdistan region of Iraq to prepare further growth with the acquisition of new oil and gas acreage and speed up the development of their existing assets.

In August 2012, the newly formed company Genel Energy acquired interest in two blocks, Bina Bawi and Miran.

Genel energy closed deal with Hawler Energy Ltd to take over 21% interests in the Bina Bawi exploration license.

This acquisition came on the top of the 23% shares that Genel Energy had previously on Bina Bawi.

Located in the center of the Kurdistan region, Genel Energy will hold 44% of Bina Bawi where the Austrian company OMV is the operator with 36% shares.

The Kurdistan Regional Government (KGR) will keep its 20% shares as part of the production sharing contract (PSC) in place between the parties for Bina Bawi.

Still in August, Genel Enegry took 26% additional interest in the Miran block from Heritage Energy Middle East Ltd (Heritage).

In addition to the direct acquisition, Genel Energy is providing Heritage with $294 million loans that can be repaid either in cash either through the Heritage shares.

Genel Energy becomes the joint operator in the Miran block.

As a result of these operations coming on the top of its previously owned assets, Genel Energy:

 – Has interests in six  production sharing contract (PSC) with the Kurdistan Regional Government (Taq Taq, Ber Bahr, Miran,Tawke, Dohuk, Chia Surkh)

 – Has become in few month the largest oil and gas producer in the Kurdistan region of Iraq

 – Holds the largest oil and gas reserves in the Kurdistan region of Iraq

 – Is planning a vast drilling campaign to develop its  production sharing contract (PSC) over the next 12-18 months

Genel Energy expands its Kurdish oil export pipelines

In this context, Genel Energy is highly exposed to the local discussions erupting between the neighboring countries or within Iraq between the National Government and the KRG about the legacy of the production sharing contract (PSC) awarded by the KRG and the repaid payment due by Baghdad to the exporting oil companies operating under this  production sharing contract (PSC)s.

To show good intention, the KRG based in Erbil, Kurdistan, had re-opened in August the export pipelines across Iraq, so that negotiations could take place in September with Iraq Government with positive outcome.

This week, Baghdad Authorities will proceed to a first payment of $650 million out of the $1.5 billion overdue.

This agreement between Erbil and Baghdad will release the pressure on the oil and gas companies operating in the Kurdistan region of Iraq, such as ExxonMobil, Chevron, Total, and even more on mid-sized companies like Genel Energy highly depending this region to encourage further investment in exploration and production.

In this context, Genel Energy is reviewing its plans to deploy its oil export pipelines system in Kurdistan.

A first pipeline is under construction by the Kurdish KAR Group between the Taq Taq field to Khurmala Dome in northern Kirkuk field.

To be commissioned at the end of the year this pipeline should connect Genel Energy to the Erbil refinery and the Iraq-Turkish export pipeline system.

A second pipeline is planned between Khurmala Dome and the Feys Khabour pumping station at the Iraq-Turkey border.

The Australian company OSD Pipelines made the front end engineering and design (FEED) for the 255 kilometer pipeline estimated to $400 million capital expenditure.

Genel Energy received bids from seven companies for the engineering, procurement and construction (EPC) contract left on hold since February 2012.

With Iraq Government and the Kurdistan Regional Government (KRG) closing a deal, Genel Energy as the international oil companies like ExxonMobil, Chevron or Total, may release more capital expenditure to develop the oil and gas reserves of the Kurdistan Region of Iraq.

For more information and data about oil and gas and petrochemical projects go to Project Smart Explorer

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