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Tuesday, April 29, 2008

Polygamy brings glorification in heaven

Officials say 31 teen sect girls are pregnant or had baby By MICHELLE ROBERTS, Associated Press Writer
1 hour, 20 minutes ago

SAN ANTONIO - Texas child welfare officials say almost 60 percent of the underage girls taken in a raid on a polygamist compound in west Texas either have children or are pregnant.

Of the 53 girls between the ages of 14 and 17 who are in state custody, 31 either have given birth or are expecting, said Child Protective Services spokesman Darrell Azar.

"It shows you a pretty distinct pattern, that it was pretty pervasive," Azar said Monday after releasing the latest figures.

Under Texas law, children under the age of 17 generally cannot consent to sex with an adult. A girl can get married with parental permission at 16, but none of these girls is believed to have a legal marriage under state law.

Church officials have denied that any children were abused at the Yearning For Zion Ranch in Eldorado and say the state's actions are a form of religious persecution.

State officials took custody of all 463 children at the ranch controlled by the Fundamentalist Church of Jesus Christ of Latter Day Saints, saying a pattern of teen girls forced into underage "spiritual" marriages and sex with much older men created an unsafe environment for the sect's children.

FLDS spokesman Rod Parker said he does not believe the CPS count is accurate. He said that from talking to ranch residents, he believes at least 17 of the girls may actually be adults but have been labeled by child welfare authorities as minors.

Agency officials have called into question claims of adulthood among the girls since the raid and have in some cases disputed documentation provided, saying the girls look younger than 18. Because many FLDS members share similar names and have complicated family relationships, identifying all of the children taken into custody has been a challenge.

"I do have serious questions about how they are determining age in there," said Parker, who is trying to get a better count from FLDS families.

He said the sect is at a disadvantage in proving names and ages because law enforcement confiscated every document that might show family relationships.

The latest information from CPS comes with "absolutely nothing to back it up other than it's coming from them, and they think we should trust them," Parker said.

All the children are supposed to get individual hearings before June 5 to help determine if they'll stay in state custody or if their parents may be able to take steps to regain custody.

Civil liberties groups and lawyers for the children have criticized the state for sweeping all the children, from nursing infants to teen boys, into foster care when only teen girls are alleged to have been sexually abused.

No one has been charged since the raid, which was prompted by a series of calls to a domestic abuse hot line, purportedly from a 16-year-old girl forced into a marriage recognized only by the sect with a man three times her age. That girl has not been found and authorities are investigating whether the call was a hoax.

On Monday, CPS also revised its total count of children in state custody to 463, up one from Friday. Azar said the change resulted from finally getting the children out of temporary housing in the San Angelo Coliseum and into foster facilities around the state where they could get a more accurate count.

Of the 463 children, 250 are girls and 213 are boys. Children 13 and younger are about evenly split — 197 girls and 196 boys — but there are only 17 boys aged 14 to 17 compared with the 53 girls in that age range.

Azar said the numbers could still change slightly because authorities have not seen documentation on all the children and have struggled to positively identify everyone.

The sect, which broke from the Church of Jesus Christ of Latter-day Saints more than a century ago, believes polygamy brings glorification in heaven. Its leader, Warren Jeffs, is revered as a prophet. Jeffs was convicted last year in Utah of forcing a 14-year-old girl into marriage with an older cousin.

Monday, April 28, 2008

A Storm of Sand became a Shelling day on Green Zone

Iraqi troops confront a sandstorm in Najaf, south of Baghdad. Similar conditions in the capital hindered U.S. efforts against fighters targeting the Green Zone. (By Alaa Al-marjani -- Associated Press)
By Sholnn Freeman
Washington Post Foreign Service
Monday, April 28, 2008; Page A10

BAGHDAD, April 27 -- Shelling rocked the Green Zone as a sandstorm blanketed Baghdad on Sunday, days after U.S. commanders said they had nearly eliminated deadly rocket and mortar attacks on the heavily fortified government zone through a security crackdown in the eastern slum of Sadr City.

Clashes continued over the weekend in Sadr City, where U.S. and Iraqi forces have confronted fighters tied to the Mahdi Army, the Shiite militia loyal to anti-American cleric Moqtada al-Sadr. The U.S. military said drones fired Hellfire missiles, killing at least three men believed to be engaging in bomb attacks.

Abu Ammar al-Mayahi, a Mahdi Army fighter, said that U.S. and Iraqi forces continued to press into Sadr City on Sunday but that the dust storm curtailed U.S. use of air power.

Ground forces had been limited to city blocks at the edge of the district where authorities are building a security wall, he said. "The situation is intense," he added. "The weather is dusty. They are trying to get further inside."

Civilians living in the Green Zone said the rocket and mortar attacks Sunday were in double digits. A U.S. Embassy spokesman said there were no reports of casualties in the zone. A military spokesman said he knew of at least two Iraqi civilians killed and one wounded in the shelling, which often falls short of the compound.

The continuing violence has dimmed hopes that a cease-fire order issued by Sadr in August and reaffirmed on Friday would ease tensions in the city. Sadr said Friday that his threat this month of an "open war until liberation" did not mean a fight against Iraq's government, but rather "the occupier," meaning U.S. and allied foreign troops.

The move was seen as an attempt to lower tensions between Sadr's political movement and the Shiite-led government of Prime Minister Nouri al-Maliki. Maliki initiated an offensive against Shiite militiamen last month in the southern city of Basra, and it quickly spread to Baghdad. Iraqi commanders have described Sadr City, where the Mahdi Army holds much control, as a foothold for armed outlaws.

The neighborhood was the scene of a sit-in protest Sunday led by members of the Sadr bloc in parliament, demanding an end to a three-week-old blockade of Sadr City and an end to military operations there.

Falah Hasan Shanshal, a parliament member who is a Sadr City resident, was among the protesters. He called for "dialogue and understanding" in place of the fighting, which he said was killing innocent women and children. He also called for a second sit-in on Monday.

On a satellite television program, Yaseen Majeed, a media adviser for the prime minister, called the sit-in a "cover for the outlaws."

Also Sunday, President Jalal Talabani met with parliament Speaker Mahmoud al-Mashhadani to discuss ways to end the Sadr City fighting, which he described in a statement as a "crisis between the government and the Sadr trend."

Lt. Col. Steve Stover, a spokesman for U.S. forces in Baghdad, said late Sunday that U.S. soldiers were tracking several engagements in eastern Baghdad, which he said amounted to "un-aimed harassment fire." Stover said the attacks involved small-arms fire and rocket-propelled grenades.

"We are not the aggressor," he said. "We went into south Sadr City to stop the rocket and mortar attacks."


U.S. army says kills 38 fighters in Baghdad attack

28 Apr 2008 04:55:45 GMT
Source: Reuters
BAGHDAD, April 28 (Reuters) - The U.S. military said on Monday it had killed 22 fighters who attacked an Iraqi checkpoint in northeastern Baghdad.

The military said in a statement the fighters had attacked the Iraqi Security Force checkpoint on Sunday.

It said U.S. soldiers had killed "the 22 criminals, forcing remaining enemy forces present to retreat.

"The criminals' small-arms fire was ineffective and there were no U.S. or ISF casualties in the attack," the military added.

Militants bombarded Baghdad's Green Zone with rockets on Sunday, taking advantage of the cover of a blinding dust storm to launch one of the heaviest strikes in weeks on the fortified compound.

The strikes appeared to defy a renewed call for a ceasefire by Shi'ite cleric Moqtada al-Sadr, which has seen many of his masked gunmen leave the streets of the Sadr City slum where they hold sway in eastern Baghdad.

Reuters correspondents heard the missiles whistling overhead and exploding inside the heavily fortified government and diplomatic compound on the west side of the Tigris River in Baghdad. Sirens wailed, ordering people to take cover.

Iraqi police said eight missiles or mortars had hit the Green Zone and another 14 fell in other parts of the Iraqi capital before nightfall in several quick bursts, killing two people and wounding 20.

"The Green Zone has received several rounds of IDF (indirect fire) but I can't say more than that," U.S. embassy spokesman Armand Cucciniello said. "The duck and cover alarm sounded and people ran out for cover."

Several more missiles were fired late on Sunday evening but it was unclear if there were any casualties.

The United States blames rogue elements of Sadr's Mehdi Army militia for firing the rockets. It accuses neighbouring Shi'ite Iran of supplying the weapons and says some were made as recently as last year. Iran denies the accusations.

Militiamen have fired 700 missiles and mortars over the past month in Baghdad, but U.S. forces had said they believed they had reduced the fighters' ability to strike the Green Zone by occupying the part of the Sadr City slum closest to it.

Sunday, April 27, 2008

U.S. and Iran Find Common Ground in Iraq’s Shiite Conflict


April 21, 2008

News Analysis


BAGHDAD — In the Iraqi government’s fight to subdue the Shiite militia of Moktada al-Sadr in the southern city of Basra, perhaps nothing reveals the complexities of the Iraq conflict more starkly than this: Iran and the United States find themselves on the same side.

The causes of this convergence boil down to the logic of self-interest, although it is logic in a place where even the most basic reasoning refuses to go in a straight line. In essence, though, the calculation by the United States is that it must back the government it helped to create and take the steps needed to protect American troops and civilian officials.

Iranian motivations appear to hinge on the possibility that Mr. Sadr’s political and military followers could gain power in provincial elections this fall, and disrupt the creation of a semiautonomous region in the south that the Iranians see as beneficial.

The American-Iranian convergence is all the more remarkable because of mutual animosity. The United States says that Iran has backed thousands of attacks on American troops in Iraq, bitterly opposes its nuclear program and has not ruled out bombing Iran if Iranian policies do not change. Meanwhile, at the level of senior officials at least, Iran takes quite seriously its depiction of the United States as the planet’s Great Satan.

But the two sides are making nice on the issue of fighting Mr. Sadr, one of Iraq’s most powerful Shiite clerics. As Iraqi government soldiers took control of the last areas of Basra from Mr. Sadr’s militia on Saturday, concluding a monthlong effort, Iran’s ambassador to Iraq, Hassan Kazemi Qumi, took the unusual step of expressing strong support for the government’s position and described Mr. Sadr’s fighters as outlaws.

When it comes to which Shiite leader Iran and the United States want to see in power, at least for now they largely see Mr. Sadr’s ascendance as a common threat — nowhere more so than in Basra, the oil-rich capital of Iraq’s most populous region, the Shiite south.

Although there are many groups in Iraq — Shiite and Sunni, Turkmen and Kurd — it is a majority Shiite country, and in the end the geopolitical calculus of the United States and Iran has to do with what kind of Shiite government they want in control.

The party that Iran and the United States are backing, the Islamic Supreme Council of Iraq, is a bitter rival of Mr. Sadr’s political movement and has managed to play to the interests of both countries. Under Iraq’s Constitution, provinces can form regions with considerable independence from Baghdad. The Supreme Council advocates a large, semiautonomous region in the south, similar to Kurdistan in the north, made up of the nine southern provinces. And because many of the council’s leaders lived in exile in Iran during the rule of Saddam Hussein, Iran has political ties to the group.

Coupled with Iran’s shared Shiite heritage, such a region would amplify Iran’s influence over the oil-rich area.

The American backing of the Supreme Council comes in part because the armed wing of the council, the Badr Organization, has never confronted American troops. As one American general said, “They aren’t trying to kill us.” The same cannot be said of Mr. Sadr’s militia, the Mahdi Army, which the United States believes is behind some of the most sophisticated and deadly attacks on American troops.

Second, the Americans have treated the Supreme Council as an ally from the beginning of the fight against Mr. Hussein. Its members were guaranteed safe passage when they returned from Iran and were made charter members of Iraq’s first governing body after the American-led invasion toppled Mr. Hussein’s regime. Since then, the United States has backed the Iraqi government, which in turn relies on the Supreme Council to stay in power in the country’s parliamentary system.

But this position could have damaging unintended consequences. It could push the United States further into the vortex of an intra-Shiite political struggle and could lead to the creation of a large, Iranian-influenced region in southern Iraq.

For the Iraqis, the battle is in part a political one over how the balance of power would change province-by-province and ward-by-ward in coming elections. The prize is control of provincial councils that have significant budgets, jobs and local power.

During the elections in 2005, Mr. Sadr’s supporters did not vote in most southern provinces, so despite having grass-roots support they were not represented in local governments.

But the Supreme Council encouraged its followers to go to the polls, and they dominated even in places where their supporters made up a comparatively small percentage of the electorate. If Mr. Sadr’s movement participates in the next elections, scheduled for October, they are sure to fare better than they did when they did not field candidates, and the Supreme Council is likely to lose some of its power.

For instance, in Qadisiya Province, the Sadr movement fielded few candidates and did not vote in great numbers; the Supreme Council was able to dominate the provincial council and control the governorship.

In contrast, just to the southeast, in Maysan Province, where the Sadr bloc did participate, it won the largest number of seats and controls the governorship.

The fight in Basra and elsewhere in the south, which appears to have weakened the Sadr movement, is also a way to make it more difficult for the organization to use its militia to coerce voters and intimidate political rivals. In turn, that puts the Supreme Council in a better political position to retain power because its armed wing is well entrenched, having held positions in the police and army for years.

But the political calculus that has landed the Americans and Iranians on the same side of the Shiite conflict in southern Iraq breaks down in the capital. The foremost example is Sadr City, the dusty, impoverished enclave of more than two million Shiites in northeastern Baghdad where Mr. Sadr has his base of power.

There, Iraqi and American forces are trying to oust essentially the same Mahdi fighters who were stalking the streets in Basra. And the stakes for the Americans are even higher, because the Mahdi Army has been using parts of Sadr City and its surroundings as a launching pad for rockets aimed at American and Iraqi government offices in the Green Zone.

But there is at least one crucial difference from Basra: in Sadr City, American troops are playing a much bigger role in the battle. For the Iranians, who have consistently opposed the American presence here, that difference comes with consequences.

Iran stridently opposes the operation against the Mahdi Army in Sadr City.

Friday, April 25, 2008

Oil exports boom as attacks on pipelines cease

21.Reidar Visser said
Wednesday, 16 February 2011 8:28 at 08:28

“Proto-political Conceptions of Iraq in Late Ottoman Times”, in International Journal of Contemporary Iraqi Studies vol. 3 no. 2 (2009). I have pasted the abstract below; specifically my congruence argument focuses on the striking similarities between, on the one hand, the “bigger Baghdad” vilayet in the nineteenth century as well as mameluke Iraq in the late eighteenth and early nineteenth century, and, on the other, the “modern”, so-called “invented” Iraq. I have treated this subject also in my book Basra, the Failed Gulf State: Separatism and Nationalism in Southern Iraq (2005).

“The article criticizes the so-called ‘artificiality paradigm’ concerning the emergence of the modern state on Iraq, according to which the kingdom of Iraq that came into being in 1921 was nothing but a random collection of Ottoman provinces that had little in common. On the basis of documents from the late Ottoman period, the article shows that the opposite appears to be the case: In many ways, the modern state of Iraq had regional antecedents that predated the British invasion in 1914. The article shows that for long periods before 1914 there existed a pattern of administrative centralization of Basra, Baghdad and Mosul under Baghdad as a paramount regional capital, that this regional entity was often described as ‘Iraq’ in administrative and diplomatic correspondence, and that the local inhabitants often referred to Iraq in a patriotic sense.”

Coalition forces, oil workers welcome unexpected lull in sabotage in north

Motorists wait Thursday to buy fuel on the road outside a gas station near Iraq's largest oil refinery in Beiji, Iraq. Iraq have endued three years of attacks on oil pipelines. Three weeks ago the attacks stopped and U.S. commanders can't say why, but renewed oil sales are sending needed cash to Iraqi's government.

updated 4:52 p.m. ET, Thurs., June. 29, 2006
BEIJI, Iraq - For more than two years the attacks came like clockwork. As soon as the military secured and workers repaired the pipelines from Iraq’s northern oil fields, just when the valves were about to open, insurgents would strike.

But roughly three weeks ago they suddenly stopped, letting crude oil flow freely from Iraq’s vast reserves near Kirkuk.

Perhaps insurgents feared reprisals in Salahuddin province, where pipelines from Kirkuk flow to the country’s largest refinery in Beiji. Maybe terror leader Abu Musab al-Zarqawi’s death disrupted a chain of command that ordered the attacks, military officials said.

Whatever the cause, the U.S. forces welcome the change, even if history since the U.S.-led invasion in 2003 has shown the free flow of oil in Iraq is only temporary at best.

“I just hope that it lasts long enough where people start realizing ‘Damn, we’re making money. We could be rich like Kuwaitis,” said Army Lt. Col. Craig Collier, deputy commander of the 3rd Brigade, 101st Airborne Division. “But what is really going on? We don’t know.”

Moving 2.5 million barrels a day
In the past three weeks, Iraq has exported 6.2 million barrels of crude oil to Turkey from its northern fields. Total exports from Iraq in that period, including the oil fields in the south, have increased to 2.5 million barrels per day, the highest level since the invasion, the Oil Ministry reported.

With a going market price of $60 a barrel in Turkey, military officials believe exports so far equate to about $372 million since oil began flowing from the north. Oil is the biggest source of income for the Iraqi government, which is struggling to curb violence and restore the supply of electricity and water.

Iraq, a founding member of the Organization of Petroleum Exporting Countries, sits atop the world’s third-highest proven reserves. With an estimated 115 billion barrels, exceeded in OPEC only by Saudi Arabia and Iran, the Bush administration predicted three years ago that Iraq would finance its own reconstruction.

But Iraq’s oil production slipped after the invasion, stuck below even the reduced levels that prevailed in the 1990s, when the country was under tough U.N. sanctions.

The 3rd Brigade, nicknamed the “Rakkasans,” has studied the intricate web of oil corruption near the refinery in Beiji as part of a renewed effort to restore the oil industry.

Targeting the smugglers
Working with other coalition and Iraqi soldiers, they targeted oil smugglers, who they believe are behind many of the attacks on the fuel export lines. The black market truckers buy gasoline or diesel at Iraq’s government-subsidized prices and drive to Turkey to sell it for 10 times the amount, so official exports compete and cut into their profits.

Despite scores of arrests, the attacks still came — always as the oil storage reservoirs near Tikrit neared capacity at 1.5 million barrels. The timing was so perfect that the military suspected an insider at the refinery in Beiji or the oil fields directed the strikes.

Ties to the insurgency also were suspected.

Iraq has the capacity to ship 500,000 barrels a day from its northern oil fields to the refinery, so disabling the pipeline with bullets or bombs makes a major dent in revenue to the cash-starved government. Insurgents also could be profiting directly with a share of black market revenue, military officials said.

When pipelines are down, excess oil is shipped from Kirkuk to the refinery in Beiji — oil that would normally be exported. It is routed back to the refinery to keep workers employed and gasoline available. The refinery and its neighboring power plant, which supplies electricity as far as Baghdad, are the largest industries in northern Iraq.

Profiteers: How high up the food chain?
The back flow of oil to Beiji also increases the opportunity for criminals to divert oil for the black market, said Capt. Adam Lackey of Trafalgar, Ind., a commander in the 187th Infantry Regiment.

And there’s no telling how high in government those who profit sit, he said.

“The web goes all the way to Baghdad and back, when we’re talking about who takes money and who benefits,” said Lackey, who works with city officials in Beiji and Siniyah, both near the refinery, to help secure the oil infrastructure.

Story continues below ↓


Whether the break in attacks is a sign of progress or only periodic calm, oil is flowing fast.

This week, oil minister Assem Jihad said 1.6 million barrels per day was being exported from the southern port of Basra while Iraq’s North Oil Company was pumping 300,000 barrels per day from Kirkuk to the Turkish port of Ceyhan.

“With the new plans adopted by the ministry, we hope to add 200,000 to 300,000 barrels per day before the end of this year,” Jihad told the Associated Press on Wednesday.

Anxious moments
It’s a nervous moment for Iraqi and U.S. officials, both of whom realize that the eventual departure of U.S. soldiers hinges on economic recovery and improved security.

Collier, who will soon return to the United States when another military unit takes control of northern Iraq, said he hopes the flow will continue. But he’s hesitant.

Whether the attacks have stopped due to increased security measures, higher expectations among Iraqis, or a combination of factors, he can’t tell.

“It’s like you’re in a fun house of mirrors and you’re playing chess,” Collier said. “You may be making absolutely the right move. You may be doing something really stupid. You just don’t know.”

The Associated Press.


Maliki Capitulates on the Kurdish Oil Deals
Posted by Reidar Visser on Saturday, 5 February 2011 16:04

These latest developments mark a triumph for a primitive, identity-oriented and Balkans-inspired political agenda of potentially destructive ethno-nationalism that many Iraqis had been hoping was on its way out.

this is an often-misunderstood aspect of Iraqi federalism: According to article 115 federal regions AND governorates not organised in a region (i.e. ordinary, normal governorates like Basra and Wasit) have all the powers not specifically given to the central government. The constitution is inconsistent in that it specifically mentions a right to form regional guards for the federal regions (“on top of” the residual powers, which does not make sense), but as far as oil and energy are concerned the two administrative categories are on exactly the same footing. That’s why it is interesting that Maliki uses the “drilling environment” argument to justify his acceptance of the deals. Presumably there are “future fields” in some of the governorates where this kind of technical argument may apply as a precedent.

Maliki had been talking about Tawke and Taq Taq. However, as you say, it would have been less trouble for Maliki to recognise those two Kurdish contracts under article 141 and leave it at that, even though Shahristani has refused to do so ever since 2006. But now he seems to be going further than that, since the argument about the drilling environment is a more general principle. I see no reason why he should have made that point unless he intended to recognise a greater number of Kurdish contracts.

By the way, as far as I read 141 it is the seating of the first government pursuant to the constitution, i.e. May 2006, that is the relevant cut-off point for the automatic validity of contracts (unless they are in conflict with the constitution), not the end of the CPA period (which Galbraith thought would matter enormously and therefore made a big point of having DNO sign the contract before end of June 2004), nor the creation of an oil and gas draft law.

I am wondering what is the constitutional basis for using the creation of a draft law in 2007 to constitute some kind of critical point regarding the validity of the contract? It just seems like an arbitrary point in time. That’s why I can understand those who argue for the validity of pre-2006 contracts (article 141 of the constitution says agreements already signed by the Kurds are valid and the constitution came into effect with the seating of the Maliki govt in May 2006) even though I also understand how the oil ministry is rejecting them on grounds that they don’t live up to the last criterion of 141: Compatibility with the constitution itself (since the central government was neither consulted nor informed, which seems imperative under article 112).

Do you by any chance have the link where Maliki recognised those two contracts as having a special status? I think Shahristani continued to reject that interpretation until very recently, citing incompatibility with the constitution.

I still don’t understand why Shahristani is/was making a point of the introduction of the draft oil/gas law as a particularly critical juncture. If there is an argument for the special status of the DNO/Genel deals in the constitution, I would imagine it would have to be article 141, in which case the question of compliance with the constitution itself would seem to be the key point of dispute.

Comments to AFP by Iraqi Prime Minister Nuri al-Maliki today on the oil deals signed by the Kurds are nothing short of sensational. That exports from the Kurdistan fields will go ahead has been rumoured for some time, but the more crucial point is the clear assertion by Maliki that the contracts signed by the Kurds with foreign companies will be honoured.

To appreciate the extent of the change of Maliki’s position, one needs only remember the vehement criticism of these bilateral deals by his point men on energy issues like Hussain al-Shahristani and Abd al-Hadi al-Hassani. It was this kind of opposition that led to the breakdown of the first export attempt back in summer 2009. In fact, just weeks ago, oil ministry officials were adamant that even if the exports were to be resumed, costs only (and not profit) were to be paid to the operating foreign companies by the central government.

In terms of the perennial debate about the constitutional right of provincial entities to sign contracts without reference to Baghdad, Maliki appears to sidestep the question somewhat by offering an ad hoc justification to the effect that oil drilling in the Kurdish areas is technically more difficult than in the south and for this reason it is permissible to accord greater profits to the companies that invest in the north than those operating in the south (where technical service contracts and more modest per-barrel remuneration have been the norm for foreign companies dealing with Baghdad).

III Forum quotes

It’s late so I will be brief. I think you have it in a nutshell. Below is an alternative scenario to the one I earlier described – and which puts Reuters in a slightly better light as not actively attempting to trash the AFP story.

Shahristani, we know, personally remains hostile to the idea of Kurdish PSCs while the south has service contracts. So he rings his tame journalist friend at Reuters to contradict Maliki’s statement and give them an exclusive, embargoed for release during London market hours.

He does this rather than call a press conference or issue a press statement to all the media, which would involve some scrutiny by confused hacks. Reuters duly publishes the statement and the market drops. Job done.

We don’t know if AFP has an equally close relationship with 'their man' Maliki but it is noteworthy that both men used a single newswire and not news conferences open to all the media. Thus it is possible that neither AFP nor Reuters initiated these stories but were simply used as mouthpieces.

>>>>Just googled Ahmed Rasheed of Reuters past history, he seems to cover a lot of news worthy stories. Once you start flickering through the stories you soon realise that there is a connection with shahristani.

Whenever in the past there has been news which shahristani wishes to make public guess who is first to report it " Ahmed Rasheed "

Now isnt that a bit strange considering there are many respected Journalist in the middle east especially in iraq, so why choose Ahmed all the time??

Could be just a coincidence! or is ahmed just a puppet?

Could have been quite as easy for Ahmed to get a quote from the new oil minister if he had really wanted.<<<<


Analysis: Markets moved, but KRG-Baghdad deal not done

Prime Minister Nouri al-Maliki has reportedly agreed to support Kurdistan’s oil contracts — a significant step, but only one of many on the long path to reconciling a years-long dispute.

. Maliki has reportedly agreed to accept oil contracts signed by the Kurdistan region, where Salih is now prime minister.Ben Lando
Published February 8, 2011
BAGHDAD - After weekend news that Prime Minister Nouri al-Maliki now supports Kurdish oil contracts, investors reacted with exuberance (Full of unrestrained enthusiasm or joy.
). But in the years-long dispute between Baghdad and the semi-autonomous Kurdistan region, political rhetoric and hopeful speculation have often out-paced real progress toward reconciliation.

Norwegian oil company DNO’s shares jumped after Agence France-Presse (AFP) reported that Maliki has agreed to all of the semi-autonomous Kurdistan region’s production sharing agreements (PSA) with foreign oil companies. But as politicians start to walk back Maliki’s quote, and with few details emerging, it appears the deal is not done

AFP Saturday quoted Maliki as saying that his Oil Ministry has agreed to the Kurdistan Regional Government’s (KRG) deals. For more than four years, Maliki’s administration has claimed that only the central government has authority to sign oil contracts, and has condemned the Kurdish deals as illegal.

Maliki’s about-face would represent significant progress toward ending the dispute. But when pressed for details, Maliki’s own office was less than candid. His spokesman, Ali al-Mousawi, referred journalists to Deputy Prime Minister for Energy Affairs Hussain al-Shahristani, who was oil minister from mid-2006 until December 2010.

Reuters caught up with Shahristani briefly in a stairwell in his new office. He reportedly said that Maliki was misquoted, and that
if the KRG deals are to be approved, they need to be reviewed and converted to the same type of service contract that Baghdad has used over the past two years, for the 15 oil and three gas deals it has signed or awarded to the world’s largest oil companies.

Maliki, on the other hand, was quoted by AFP saying that the KRG’s largely uncharted and difficult fields could warrant a contract type like a PSA, which effectively acknowledges a company’s investment risk by granting a larger share of potential rewards.

Even if Maliki does now support Kurdish PSAs, however, that would not settle the matter. According to some interpretations of Iraq’s old but still-valid oil laws, such deals would require parliamentary approval, which none of the Kurdish deals have received.

Nor would Maliki’s support of Kurdish contracts solve the deeper conflict between the KRG and the central government. The two sides have indeed disagreed on contract models, but the crux of their dispute centers on more basic issues of autonomy and authority. How decentralized will governance of the country be? Are regional governments allowed to set their own course within the federated state, and sign deals for their own oil and gas reserves? Or does that authority rest only with a central government?

A long and deep divide

These fundamental questions have defined the fault lines of Iraqi politics for the past five years.

Iraq’s 2005 Constitution calls for an oil law to draw the lines of authority over the country’s oil sector. Representatives from Baghdad and the KRG negotiated such a draft oil law in 2007. Under that agreement, Iraq would have effectively grandfathered in the deals that the KRG had already signed. But the law stalled before it reached the full Parliament.

In the absence of such a law, the two sides have effectively developed two parallel oil sectors, drawing authority from their own favored interpretations of the constitution.

The story goes back to Saddam Hussein, who deprived certain areas of government services and resources, such as those populated by Iraq’s minority Kurds, which sparked Iraqi Kurdistan’s desires for economic self-determination. After the 1991 Gulf War, the Kurdish leadership grew ambitious, as it received a decade of international protection. In 2002, with a U.S. invasion imminent, the Kurds clinched a deal with Turkey’s Genel Enerji for the Taq Taq field.
Between then and 2007, the Kurdistan Regional Government was formed, and signed three additional contracts, including for the Tawke field, with DNO. Baghdad winced at those deals, but already had its hands full battling a roiling insurgency.

After the draft oil law stalled, both sides dug in their heels. The KRG hardened its position by autonomously signing three dozen more deals, while its regional parliament passed its own oil law. Baghdad, relying on Saddam-era laws that have not been overturned or replaced, began plotting its own oil field development strategy and ultimately signed contracts with some of the world’s largest oil companies. Maliki and then-Oil Minister Shahristani also blacklisted KRG-signed firms from investing in the rest of Iraq’s upstream market or purchasing Iraqi crude, exports of which are controlled by the central government.

The result has been a complex balance of political counterweights. On one side, the KRG needs Baghdad, which controls the taps on both oil exports and revenues. On the other side, Baghdad needs the added revenue from the KRG’s oil to help meet a budget shortfall – and Maliki relied on Kurdish support in Parliament to win a second term.

Both sides therefore have incentives to re-start Kurdish exports. But past attempts have failed because they have been unable to sufficiently resolve the underlying conflict.

In 2009, two Kurdish fields, Tawke and Taq Taq, exported for four months, in a good-faith effort by the KRG. But the deal proved to be premature. The two sides had agreed on how to distribute oil revenue – the budget annually allocates 17 percent to the KRG – but there was no mechanism to pay the contractors. Baghdad claimed that the KRG, as signatory to the contracts, should pay those costs from its own regional budget.
Without mainstream acceptance of the KRG’s contracts, Kurdish oil was thus effectively shut in.

Band-aids on the wound

Over the past year, Deputy Oil Minister Abdul Karim Luaibi, who in December was named Shahristani’s replacement as oil minister, has led numerous negotiations with the KRG’s Minister of Natural Resources, Ashti Hawrami, in an effort to ease their way out of the impasse. In mid-January, KRG Prime Minister Barham Salih met with Maliki in Baghdad and announced a breakthrough that would start exports Feb. 1. Exports did restart, one day late, on Feb. 2, and are projected to ramp up to 100,000 barrels per day (bpd).
The details of the Maliki-Salih and Luaibi-Hawrami deals have almost totally been kept secret. What has been confirmed by KRG and Baghdad officials is that exports from Tawke and Taq Taq are restarting, that their combined exports will reach a 100,000 bpd average this year, and that part of the revenue will cover undisclosed costs for the companies, but will not pay profits.

Even with an agreement sketched out, the payment issue could become complicated. Any pay to companies will have to be verified by Iraq’s Board of Supreme Audit. That body will determine not only how much the contractors are owed, but also how much revenue the KRG and the companies have already received from their limited oil sales to date, and how much of that money is now due to the central government coffers.

In essence, the recent progress has comprised a series of temporary measures, like band-aids on an old wound that has been opened and re-opened many times. In order to close the gash between Baghdad and the KRG, Iraq needs a series of short- and medium-term political and fiscal stitches to bring the sides closer together.

Maliki’s purported acceptance of the Kurdish contracts would certainly represent one such stitch. But ultimately, only a comprehensive agreement – be it through Parliament’s passage of oil legislation or a deal between Maliki and the Kurdish leadership – will seal the wound.

Re: Sharistani's comments Arundallio 3

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Sharistani and Maliki are singing from the same hymn book it's just called " politics" or " negotiating". One of the basic principles is never never allow the person you are negotiating with to really understand the offer. Never allow them to see the full picture. And never allow them to understand what you really want or are prepared to pay. I have been dealing with guys like this for 35 years in the uk. I thought I could sell sand to the Arabs. That was until I met the Arabs. They are in a different class when it comes to negotiating and obscurity. This is just more of the same thing. Mutt and Jeff!! Good Cop Bad Cop. They are saying the same thing they are just " selling it " to different people in different ways.

Mutt and Jeff!!: A stupid pair of men, esp. one tall and one short. (1917 —) .
D. Seaman He silently named them Mutt and Jeff. One [man] stood well over six feet...while the other barely reached to his mate's armpits (1974).

Sharistani's comments CamelsBreath 4

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I recall a while back (Others may recall too) that Sharistani stated in an interview that the Kurdish oil dispute was resolved and that all was basically ok.

For Sharistani to now state the opposite , seems to be rather contradictory and smacks of another agenda.

Anyway, was great to see our GKP fly, it does also show that the mkt is waiting for certain pieces of news , as I stated before.

So PSC's, SA-1 SH-2 etc, OIP , Reseves etc, all going make us VERY happy guys.

We have come this far, this year is ours.

Good luck to all in GKP.

Today Sharistani said this "...we expect that all these (Kurdish) production-sharing contracts should be amended to be service contracts in order to be approved"

Approved! - a big change from previous stances.

So we will either have a PSC or a SC.

The KRG are our Strategic partner - and so far we could have one of the biggest fields next to Kirkuk.

We've heard the Iraqi Chief say and describe the reasons why terms are different in Kurdistan re geology extraction etc. The Kurdistan region is about the toughest for exploration.

Most if not all of the SCs in Iraq are for previously discovered fields.
Some of those SCs range up to $8.50/b.

I've added several hundred thousand shares today and i'm as confident as Kozell, Gestenlauer and Sammarai in that video.



Re: DNO-Maliki and Shahristani on oil co... investor48 17

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Hi GKpians,

It is not easy to balance the powers to lead Iraq and took Maliki more than 8months to accomplish it!The Kurdish Alliance have 49seats inclusive of the other minorities and Maliki has 89seats plus INA and Hakim's party making up a total of 159seats.

Hakim did not throw his support behind Maliki initially but behind Allawi
and it would not be easy for Shahristani to garner the support of Allawi,Kurdish Alliance as an alternative to Mailki,IMHO.Hence we can speculate until the cows come home,we will never know the reasons for the contradictory statements of Maliki and Shahristani!!

Shahristani, a Deputy PM supposedly has executive powers,but i have never seen a deputy PM with real powers!!Either you are number one or not number one!!Being number 2 does not make one equal to number 1!

The SP is undergoing some consolidation after the recent rise,and there have been some very serious buying and this will continue,IMHO.

We are not privvy to the details of a TSC that takes exploration risk and the reasons behind Shahristani's trying to streamline the Oil Contracts are due mainly that the KRG has back in rights to all Kurdish PSC's and also has benefits on the infrastructure taxes.

The solution lies primarily on how much Mailki needs the Kurds to stay in power and the political commitment and concessions he made to Barzani in return for Barzani's support for him to be PM!!

IMHO, a compromise will be reached between Maliki,Shahristani and the KRG.The stakes are too high for Baghdad and the KRG.But whatever the outcome,oil will flow in Kurdistan,contracts will be ratified and exploration and production will continue in Kurdistan and there are no oil companies halting their work programmes and as far as
GKP is concerned,it's full steam ahead.

The politics are so much better today than 5months ago and even Shahristani no longer talks about illegal contracts but that the contracts must be brought in line with Baghdad as a TSC but details of a TSC with exploration risks have not be mentioned!
Looking at SNM presentation,it shows both Addax and DNO selling a fair amount of oil into the local market,at least 40k barrels per day and once export resumes,i see a possibility of GKP supplying a sizeable quantity to the local market and we can expect some solid cash flow!!

Patience and steadfastness are needed at all times,the next big move north could catch all of us by surprise,and this has been the hallmark of GKP!!

Goodluck and best wishes to all,keep your shares safe and keep an eye on DNO's SP!!


Preparations Finalised at Halfaya Oilfield

Posted on 03 December 2010. Tags: CNPC, HaLFAYA, Petronal, South Oil, Total

Companies investing in the al-Halfaya oilfield finalized the construction of residence camps and the setting up of drilling equipment to embark on the project on Dec. 15, according to the Missan Oil Company director on Friday.

“The consortium of Chinese, Malaysian and French companies investing in al-Halfaya oilfield, 25 km [15 miles] east of al-Amara city, completed the logistical and technical preparations for their work,” Ali Maarij told Aswat al-Iraq news agency.

“Drilling will take place at two sites after all relevant equipment is installed there and all 3-D seismological surveys are conducted in the 350-square-kilometers field,” he added.

The Iraqi oil ministry had signed in Baghdad a final contract with a consortium of companies led by China’s CNPC with France’s Total and Malaysia’s Petronas to rehabilitate the Halfaya oilfield, located in the eastern areas of Missan province, 390 km south of the Iraqi capital Baghdad.

Eastern Missan is home to six producer oilfields: al-Bazrakan, Abu Gharb, al-Fekka, al-Halfaya and al-Amara in addition to the Majnoon field, which is a joint one with the South Oil Company (SOC).
There are also five explored non-producer fields: al-Huwayza, al-Rafie, Rafidain al-Sharqi, al-Dujaila and Kemit.


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Categorized | Oil & Gas, Tenders
PetroChina Invites 7 Contractors to Bid for Halfaya
Posted on 26 December 2010. Tags: CH2M Hill, China National Petroleum Corporation, China Petroleum Engineering Construction Company, CNPC, CPECC, Daqing, HaLFAYA, KNM, Malaysia Marine & Heavy Engineering, Missan Oil Company, PetroChina, Petrofac, South Oil Company, Technip, Total

PetroChina has invited seven contractors to submit the bidding documents for engineering, procurement and construction work on the first phase of development at the Halfaya oilfield in Iraq in the first week of 2011, the Norway-based energy newspaper Upstream has reported.

The report said the companies invited to participate in the tender include the UK-listed Petrofac, France’s Technip, CH2M Hill of the U.S., China Petroleum Engineering Construction Company (CPECC), Daqing Engineering & Construction of China, and Malaysia’s KNM and Malaysia Marine & Heavy Engineering.

According to the report, CPECC could have an upper hand over other bidders thanks to its status as PetroChina’s sister company under the umbrella of China National Petroleum Corporation (CNPC).

Under the development and production service contract signed with Missan Oil Company in January of 2010, a PetroChina-led consortium aims to kick off production of 70,000 barrels per day from Halfaya in its first phase of commercial production.

PetroChina has a 37.5 percent stake in Halfaya, with 25 percent hel d by Iraqi’s South Oil Company, 18.75 percent by Malaysia’s Petronas and another 18.75 by French giant Total.


Iraq: Total and Partners PetroChina and Petronas to Develop the Halfaya Oil Field

Posted on 29 January 2010. Tags: Iraqi, Oil & Gas

Total announces that, within the framework of Iraq’s second petroleum bidding round organized by the Iraqi Ministry of Oil on December 12th, 2009, the consortium led by PetroChina Company Ltd signed on January 27, 2010 a 20-year Development and Production Service Contract with Missan Oil Company for the development of the Halfaya oil field. Total E&P Iraq holds an 18.75% interest in the consortium, alongside the operator PetroChina (37.5%) and partners Petronas Carigali Sdn. Bhd. (18.75%) and the State Partner South Oil Company (25%).

The Halfaya oil field is located in the Missan governorate, 35 kilometers southeast of Amara city, and spreads across 30 kilometers long and 10 kilometers wide. The consortium intends to increase the current oil field production from 3,100 barrels of oil per day to 535,000 barrels of oil per day.

“In signing this agreement, Total resumes its activity in a country with important petroleum resources and potential. Total remains committed to accompanying the development of the Iraqi oil industry and is looking at engaging in other cooperation projects. In working with its partners PetroChina and Petronas on the Halfaya oil field, Total will also further strengthen its international partnership with world-class national oil companies”, said Yves-Louis Darricarrère, president Exploration & Production, and Total.

In Iraq, Total started its activities in the 1920s with the discovery of the Kirkuk field. In the 1970s, Total brought the Buzurgan and Abu Ghirab fields on stream. Since then, Total has continuously cooperated with the Iraqi authorities on various technical studies and has provided training to numerous local engineers.


Total Wants Bigger Stake in Iraq’s Halfaya FieldPosted on 25 April 2010. Tags: CNPC, HaLFAYA, Total

23 April 2010 - Reuters

Total is consdering a bigger stake in the Halfaya oilfield, in a bid to increase its presence in Iraq, its chief executive said on Thursday.

China National Petroleum Company (CNPC) is the majority partner in the oilfield and Total owns an 18.75 percent stake in the field. “Iraq is a strong part of our strategy in the world and we certainly don’t intend to remain a minority partner in the Halfaya field,” Christophe de Margerie told an international oil conference in Paris. Iraq, which has the world’s third largest oil proven reserves, signed a final contract earlier this year to develop Halfaya with CNPC, Total and Malaysian state firm Petronas.

Halfaya, in southern Iraq, has estimated reserves of 4.1 billion barrels of oil.
The field could help turn Iraq into one of the world’s three biggest oil producers and earn Iraq billions of dollars it needs to rebuild after decades of war, sanctions and economic decline.

The deals emerging from two oil contract auctions could raise Iraqi output capacity in seven years to 12 million barrels per day, rivalling top producer Saudi Arabia, from around 2.5 million barrels oer day now.

But Iraq’s oil minister has raised questions over the planned expansion as Baghdad considers OPEC output curbs that may keep supply well short of ambitious capacity targets.


Total CEO Cautious on Halfaya Ramp-Up
Posted on 15 September 2010. Tags: Christophe de Margerie, CNPC, HaLFAYA, Petronas, Total

Total’s Chief Executive, Christophe de Margerie, said on Wednesday that he expected the company’s output in Iraq to grow slowly.

“We are still in an insecure environment,” he said, according to a report from Reuters. “Don’t tell me security is there, don’t tell me that after the departure of certain soldiers that will create more security… The logistics don’t exist,” he said.

Total, together with partners CNPC and Petronas, signed the final contract earlier this year to develop the Halfaya field, which has estimated reserves of 4.1 billion barrels of oil.

(Source: Reuters)


Tenders for Rigs at Halfaya Oilfield
Posted on 02 November 2010. Tags: China National Petroleum Company, CNPC, HaLFAYA, Maysan Oil Company, Missan Oil Company, Petronas, tenders, Total

Bids are invited from oil service companies to supply two workover rigs for the 4.1 billion barrel Halfaya oilfield.

The tender from state-run Maysan Oil Company, along with the China National Petroleum Company (CNPC), French oil major Total, and Malaysian state firm Petronas, closes on Nov. 28, and the offer must remain valid for 90 days after the bid closing date.

“First drilling is supposed to start in November 2010, and three more drilling rigs are to be mobilized in the near future,” the tender documents obtained by Reuters on Tuesday said.

“Therefore, two 750 HP workover rigs are required for well completion, well testing, acidizing and other workover operations in Halfaya oilfield,” it added.

The contract duration will be for one year and may be extended for another year.

Another Tender to Supply Halfaya OilfieldPosted on 14 September 2010. Tags: CNPC, HaLFAYA, Missan Oil Company, tenders, Total

China’s CNPC and its partners have invited bids from energy companies to supply a liquefied petroleum gas (LPG) compressor unit for the 4.1 billion-barrel Halfaya oilfield, according to a report from Reuters.

This is in addition to the tenders we reported on last week.

State-run Maysan [Missan] Oil Company has invited bidders to supply and install a liquefied petroleum gas compressor package within a 30-months period to capture gas being flared at the southern oilfield, according to a company statement obtained by Reuters on Tuesday.

The tender closes on Oct. 9 and the offer stays valid for 90 days after the bid closing date.

The winning company should provide job site services and technical support during installation, start-up and test run of the liquefied petroleum compressor unit, a copy of the bidding document showed.

Liquefied petroleum gas from Halfaya would be transferred to Iraqi state-run South Gas Co. for domestic needs and power generation, an oil official at Maysan Oil Co. said on Tuesday.

(Source: Reuters)


Ahmed Al-Shammari
Shahristani is an individual who has personal animosity to the Kurdish people in Iraq. The reasons are not to be written on a forum but relate to his time living in the Kurdistan Region, and involve family members of his. I do not wish to defame him, only hope that he tries to focus more on bringing electricity and basic services to the provinces outside the Kurdistan Region, rather than becoming completely obsessed with Kurds. The saddest part is that he is not even an oil man, and this is what baffles me and most Iraqis. I am sure Da3wa have Iraqis with backgrounds in the energy sector who would at least be taken more seriously than Shahristani

I think that said it best, he was a nuclear scientist. He should stick to a field more relevant to his skill set. As for personal issues, again I could probably tell you them off the record, and you can easily verify them by calling direct members of his family and asking them for quotes. I am not here to slander him, I am here to say that the fact is, Shahristani is a divisive figure, and there are others who want a centrist policy, but again I ask you:

What has he done in terms of electricity and oil? In the end of the day, Maliki is a much more popular figure among Iraqi Shi’ites with a centrist leaning. I don’t like the term that you use ‘nationalist’ as Iraq’s borders of today were created under the British Mandate, and like that famous saying goes ‘somebody’s terrorist is another man’s freedom fighter’, we can also say that in Iraq ‘one man’s nationalist is another man’s traitor’. Arab nationalism, Kurdish nationalism yes, but Iraqi nationalism is a concept extremely difficult to define.

Contracts here and now

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I never post on this forum as you seem to be such a sensitive and irascible bunch but i thought I would post this thought.

The news today is fantastic. The resource is fantastic . The MC is tiny when compared with the oil in place but pretty large when considered by lack of income.

One thing is holding this company back and it is the lack of clarity over the legality of their Kurdish contracts and the Iraqi government's refusal to ratify them.

It seems that the Iraqi government is determined to alter the contracts to mirror the deals they have made with foreign majors in iraq.

You're not Sharistani are you?

I think that's effectively what he said, but used more "Iraqi politicians" words to say it.

I disagree, mainly because that is not what the PM said and in a political heirarchy you've got to (normally) back the one at the top (unless they're Egyptian of course).

The PM said (and AFP confirmed he was not misquoted) that the Kurdish contracts would have to be ratified on a different basis because Kurdistan isn't the same as the rest of Iraq (but used more "Iraqi politicians" words to say it). Moreover to alter the contracts might be construed as nothing less than violating the political integrity and semi-independence of Kurdistan... and bring down the government to boot (at a time when the government needs to be seen to be getting on of course).

So whilst there is clearly a risk with the contracts, and hence the reason/gamble that most of us are invested here, could you please be more specific about why you think the contracts will not survive.


here and now

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They have not been ratified by the Iraqi government. They could have ratified them at any time over the past 18 months but have not done so. They clearly don't like them but they need the kurds support to keep the present government in power.

Can you show me evidence that the Iraqi government approve of these contracts? I mean evidence, not just some words from a politician and some quotes from a hack.

The big gamble on Kurd oilers with 'proved ' assets is all about contract ratification. There is still big money to be made on the explorers with low MCs who hit oil but for the companies with oil in place everything hinges on contract ratification.
All IMHO.........you are free to believe in what you like but that is roughly where I sit on this


mrs burleys nemesis 13


irascible? I should cocoa! There is no lack of clarity regarding legality. The ICG has NOT refused to ratify them; show me evidence. The contracts are being 'reviewed'. The contracts may be altered in the future to 'blend' or 'mirror' service contracts (if possible?) but no-one is saying the EXISTING contracts are illegal or will be 'altered' to become service contracts - except you. Welcome to the BB MBN


I can't see the existing contracts surviving in their present state.

Contracts Alibi 8 1

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Sharistani was trying to act the hard man. He has painted himself into a corner. The only way out for him would be if Maliki was to say that the PSCs would be altered to service contracts, and that is only going to happen if the per barrel rate is set at a higher level than in the south to reflect the higher risk and higher costs in Kurdistan. If Sharistani got his way entirely, Maliki would lose face and appear weak; if the contracts are not altered (which is also a possibility) Sharistani would lose face although that would be entirely his own fault. It depends whether or not Maliki wants Sharistani to lose face or whether he wants to put Sharistani in a position where he is indebted to Maliki. Basically it's a matter of jockeying for position and IMHO Sharistani lost the battle when he came out with his "misquoted" line. Maliki however may think it better for the long term to avoid crushing Sharistani at the moment. He may have his own reasons to get Sharistani out of the hole he has dug for himself.


CBI: Oil has the most political influence on monetary policy in the country
Posted: February 14, 2011 by THE CURRENCY NEWSHOUND -

Baghdad, February 14 (Rn) – The Central Bank of Iraq adviser, on Monday, that monetary policy is largely affected by the political oil, which is the backbone of the Iraqi economy.

He said the appearance of Mohammed Saleh, told the Kurdish news agency (Rn) that “monetary policy in Iraq is largely affected by the political in Iraq’s oil, is the fact that the last countries Rieia economy depends on oil revenues.”

Iraq relies heavily on oil to finance its economy almost stopped after the procedure for industry and agriculture in the country after April 2003.

The Central Bank was able to provide a safe umbrella of $ 50 billion, to meet the needs in the capital of the local presence and international levels.

Saleh added that “The central bank has large reserves because it believes that any imbalance in the political oil of Iraq would cause major economic problems, especially in the monetary policy that adopts the general run by the Central Bank of Iraq.”

The government plans to raise the ceiling on export of oil to one million barrels per day over the next five years, having set up three rounds of investment licenses to oil fields.

The benefit of saying that “oil revenues accounted for 85% of the income of the general budget, which also constitute 95% of the reserve money of the country, which shows by giving the government the Iraqi dinar against giving the central bank dollar in order to establish a cash reserve of strong so-called cover the currency.”

The Central Bank of Iraq earlier that fiscal policy will impose its control over monetary policy in Iraq has been activated in case the Federal Court decision on linking the Central Bank of the government.

According to the constitutional article (103) First: Each of the Central Bank of Iraq, and the Office of Financial Control, and Communications and Media Commission and the Endowment bodies financially and administratively independent, and the law regulates the work of each of them.

Second: The Central Bank of Iraq responsible before the Council of Representatives and the Financial Inspection Office and the Information and Communications House of Representatives.

And warns many parts of the loss of Bank independence and subjected to political calculations like the rest of independent bodies covered by the recent court decision, but that the court decisions are conclusive and the necessity may not be contested that the Constitution put some bodies out and it was time to append one of the actors.

The text of the Iraqi Constitution of 2005 that the central bank is accountable to the House of Representatives only, the fact that the objectives to be achieved is to build a stable financial system and reduce prices and fight inflation as well as to create stable conditions to serve the financial security, and in case of abuse, he is liable to account strictly before the House of Representatives .

In the opinion of several quarters that this procedure reflects the desire of the Prime Minister to impose its control on the hardware independent, without paying attention to downside risks for the acquisition of greater power, at the time opposed to lists of political in which most notably the Iraqi List and the Kurdish coalition, the idea of linking independent bodies the Council of Ministers of Iraq, prepared by the excess of coalition National Iraqi constitution being issued with the strong support of the latter.

And anticipate the Supreme Judicial Council voices objecting to the Federal Court decision which committed all the political blocs that court decisions have not been to object to any of them.



Sh-1 & Sh-3 Oil Production MikeyAdmin

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It will take time for Net Production to increase from Sh-1 & SH-2, as it depends on many factors.

Mainly its the amount of Oil that the Internal KRG Market can absorb which is said to be 50,000bpd.

First it requires DNO and Genels Internal Market Production to go down, as their Exports go up, then GKP's Production Sales can rise, which would mean higher overall Net Production from GKP would be needed.

As Sales Production increases, and Net Production rises, so extra Storage Facilities and Loading Facilities can be added, just as GKP have stated.

Its no used spending money without reason to.

Its all coming together quite nicely IMO.

The Interims are around the 07- Jun- 2011 Estimate, at which time we should get Monetry amounts earned, and overall Production. Or maybe a RNS before.


All together now......................................................

Both Shaikan-1 and Shaikan-3 are tied into the nearby extended well test facilities with a storage capacity of over 20,000 barrels.


Regional upheaval fuels oil protests
The regional unrest that has swept two regimes from power in Egypt and Tunisia has energized protesters in Iraq’s oil provinces, who have voiced broad dissatisfaction with the government in demonstrations around the country, some organized by oil unions.
Hundreds of oil and gas workers held a protest at the North Oil Company’s (NOC) headquarters in Kirkuk, wielding a list of demands for better treatment, and raising the specter of a strike if their calls continue to go unanswered. NOC ac…

Oil unions protest working conditions and other administrative complaints at the North Oil Company. "What is the destiny of temporary staff...Mr. General-Director?" says the poster of this protester, complaining that low-wage temporary workers should be given full-time employement with benefits and pension. (STAFF/Iraq Oil Report)
By Staff of Iraq Oil Report
Published February 14, 2011
The regional unrest that has swept two regimes from power in Egypt and Tunisia has energized protesters in Iraq’s oil provinces, who have voiced broad dissatisfaction with the government in demonstrations around the country, some organized by oil unions.

Hundreds of oil and gas workers held a protest at the North Oil Company’s (NOC) headquarters in Kirkuk, wielding a list of demands for better treatment, and raising the specter of a strike if their calls continue to go unanswered. NOC ac…


Electricity, other ministers named in rancorous session
The Iraqiya block’s Ra’ad Shalal al-Ani will lead the Electricity Ministry. An engineer and 24-year veteran of the Iraqi electricity sector, experts who advise the ministry say he is a good choice for an uphill battle.
Iraqis suffer from blackouts in summer and winter that can last days at a time. Lack of electricity has been a complaint of protesters throughout the country over the past two weeks, as well as last summer when the former electricity minister was forced out amidst a national o…

Iraqi Prime Minister Nuri al-Maliki speaks during an interview in Baghdad on February 5, 2011. (AHMAD AL-RUBAYE/AFP/Getty Images)
By Daniel W. Smith of Iraq Oil Report
Published February 14, 2011
The Iraqiya block’s Ra’ad Shalal al-Ani will lead the Electricity Ministry. An engineer and 24-year veteran of the Iraqi electricity sector, experts who advise the ministry say he is a good choice for an uphill battle.

Iraqis suffer from blackouts in summer and winter that can last days at a time. Lack of electricity has been a complaint of protesters throughout the country over the past two weeks, as well as last summer when the former electricity minister was forced out amidst a national o…

DNO’s press release from its Q4 presentation contains two interesting pieces of information with respect to the controversy. Firstly, it says “DNO has been advised by the KRG that there will be an interim period until a federal petroleum law for Iraq has passed the Iraqi parliament later this year”. It goes on to add, “the commercial terms for the interim period are under evaluation and will be reported to the market in due course”.

Who was right, Maliki or Shahristani? Maliki fudged it in his answers. He answered “I said that and he said that” but went on to say that the basic agreement was that concluded between the ministry of oil and the Kurdistan natural resources ministry according to which the central government would cover the “expenses” (nafaqat) of the foreign companies. He then went on to say, “as for the legal aspect [of the contract], that is a different matter” and refused to say anything more, thus clearly making a distinction between paying expenses to the foreign companies and paying profits as per their contracts. In essence, he retreated somewhat from his sensational statement in early February, when one could get the impression that the contracts had been approved.


Apologies if already posted, but an interesting article regarding the apparent U turn/"misquotation" by Maliki on the Kurdish oil contracts, and the reasons possibly why. Basically it could be that everyone in the south is demanding similar terms to our PSC's now, or putting pressure on the Iraqi government for improved terms.


“Maliki’s comments are historic because they mark the defeat of the centralist oil policy pursued by his previous oil minister, [current deputy prime minister] Hussein al-Shahristani, since 2006”, said Reidar Visser, an Iraq expert who runs the historiae.org website.
He [Maliki] recognizes the Kurdish contracts and their higher level of profit based on the different natural conditions for oil drilling in Kurdistan compared with the South of Iraq. This establishes a precedent that in theory could apply to new fields in the future”.

Maliki told the interviewer that there was “a need for bigger efforts” in Kurdistan, while in oil-rich Basra province, oil “is closer to the surface”.
“It’s difficult to have service contracts in Kurdistan, but it’s normal to have them in Southern Iraq”,
he added.

“Even though Maliki was talking about the two contracts covering fields that are in production, he is still creating a precedence by legitimizing production-sharing contracts awarded by one region of Iraq”, she said.

“If the Iraqi government is admitting that production-sharing contracts are applicable to exploration-and-production contracts in the Kurdistan region because of the higher risk, it will be required to be consistent and use the same contracts for exploration and production in the rest of Iraq”.
Husari cautioned, however, that she did not foresee such events taking place, noting that this would be “too controversial” in the rest of Iraq, and added that Kurdistan was a “special case because it is a long established region with its own legislature, laws and cabinet”.

The central government in Baghdad has repeatedly said it was opposed to the Kurds signing their own contracts, barring foreign firms that did so from participating in auctions of large oil fields in the rest of Iraq.
But Kurdish officials ignored those threats by clinching agreements with several international companies after the US invasion of 2003.

“Major international companies, particularly the British and the Americans, have avoided Kurdistan and turned to Baghdad, but now they’ll be regretting that they left the doors open ... and will now be playing catch-up”, said Ranj Alaaldin, senior Iraq analyst in London at the Next Century Foundation.
He added: “Baghdad’s recognition of the production-sharing contracts could also put it under pressure from both current and future investors -- the federal government will have to answer to these firms, who will be expecting better terms if not a complete scrapping of the service agreement”.



Agreement to Advance Government Receivables to Foreign Oil Companies in the Region and Cover All Counties Petrodollar


Friday 18 February 2011


Sumerian news/Baghdad

Deputy for the Kurdistan Alliance, Friday, the House leadership agreed with the Chairmen of the political blocs and the Finance Committee meeting on the Iraqi Government to pay dues to foreign oil companies operating in the Kurdistan region of Iraq, with the inclusion of “petrodollar project throughout Iraq including territory.

Najib said Al Risalat MP “Sumerian news,” today’s meeting, attended by the speaker and his deputies, heads of clusters, the Chairman and members of the Finance Committee and the Finance Minister was necessary to resolve disagreements over the general budget of the year “, stating that” the meeting discussed the add, edit, budget and urgency paragraphs to vote because the current situations in Iraq, as well as those of the Iraqi State with the International Monetary Fund Bank launches micro-projects in the country. “

The answer is a member of the Finance Committee that “the most important paragraphs that were agreed upon is the issue of foreign companies in the region of Kurdistan, Kurdistan Alliance block calls to pay their dues”, stating that “Finance Minister Rafe Al-Issawi has provided clarification on that paragraph.”

Kurdish MP emphasized that “the federal budget that included” petrodollar project includes all provinces of Iraq including Kurdistan “.

Naguib pointed out that “Al-Issawi assured that the Ministry of finance agreed with the Ministry of natural resources in the Kurdistan region to commit to the payment of those companies, and between that agreement and not necessarily indicated in paragraphs budget.”

Kurdistan Regional Government reached with the Federal Government reached an agreement to resume pumping oil from the region earlier this month, however, the agreement did not mention if Baghdad will pay dues of foreign companies operating in the region with interest, as well as the legitimacy of contracts signed between the territory and such companies.

Territory began to export oil from its territory for the first time in its history in June of 2009, Taq Taq taukei fields and at a rate of about 100,000 barrels per day, except that the Government of the territory returned back and stopped oil exports in 2009, she will resume oil unless the Federal Government in Baghdad receivables companies contracted by the provincial authorities.

Official delegation visited the Kurdistan Regional Government by Barham Salih Baghdad on 16 January, had a meeting with Iraqi Prime Minister Nuri al-Maliki agreement on a mechanism to export oil territory outwards, Maliki agreed and valid and the presence of Federal Minister Abdul Karim to would resume oil exports.

Former Iraqi Cabinet headed by Nouri al-Maliki has opposed oil contracts between the territory and foreign firms without referenced, as “illegal”, when it stressed repeatedly that the Constitution permitted this right.

Despite frequent encounters between the Governments of Baghdad and Erbil on this file, but did not come within four years of the previous Government of Nouri al-Maliki to any solutions.

The Norwegian company (DNO), one of the leading companies licensed to operate in foreign Iraq since Saddam Hussein, running taukei oilfield, where she began to pump oil export pipeline to test neglected infrastructure.

The Iraqi oil Ministry, announced in September last year, that country’s crude oil inventories at 505 billion barrels of discovered fields of 66 2.607, with stocks-to extract some 143 billion barrels.

Iraqi oil plans to increase its exports over the next six years to 12 million barrels a day, after obtaining the consent of the Organization of world


February 20th, 2011
Adnan Al-Janabi Interview

By Ruba Husari

The chairman of the oil and energy committee in the Iraqi parliament, Adnan al-Janabi, spells out his plans to speed up the legislation of the pending oil sector laws and the role of his committee in resolving the conflict between the KRG and the federal government, in an interview with Ruba Husari in his office in Baghdad Feb.19.

Q: What role do you see for the oil and energy committee in the current parliament?

A: our system is a parliamentary system, but it seems that the last council of representatives and the last oil and gas committee more or less relinquished their role of supervision, accountability and legislation. Hardly any legislation has been passed. There was a quarrel with the minister of oil, no attempt to solve the problems and what I found out now is that for four years or more, parliament has not been playing its role in the oil and gas sector. They were living between two walls. The executive which should have been supervised by parliament was left alone.

Q: What should they have done which you think this committee should do now?

A: It should do what the constitution and its internal rules and regulations say it should so. We are a parliamentary system, we should investigate, supervise, coordinate, and if there is divergence between what the people we represent think and what is being done, then we force change. We are able to do so. But I don’t think we have to reach that point. First we need to start by finding out what plans the government has and what plans the ministers have, whether oil or electricity. If they match what the people want, we will help them and coordinate. One of the biggest problems has been the stalemate between the federal government and the region of Kurdistan. This has to be resolved very early on. There is a political agreement between the various segments of the power players, basically the Iraqi National Alliance led by State of Law, Iraqia and the Kurdish Alliance. They have more or less agreed on resolving some of the outstanding issues. We, the committee and myself, intend to find out the intentions of the ministers. I have been talking to all parties, we have more or less agreed in principle to continue understanding each other. We are starting an initiative, as parliamentary committee, to coordinate between the regional government of Kurdistan and the federal ministries, especially oil.

Q: What role can you play in resolving the conflict between the federal government and the KRG?

A: We are the legislature. The constitution authorizes us with regard to Kurdistan to carry out the will of the writers of the constitution, that there should be coordination between the two and we are determined to play that role. Practically speaking, I have been talking to [the minister of national resources in Kurdistan] Ashti Hawrami, and to the ministers of finance [Rafe al-Issawi] and oil [Karim al-Luaybi] and they all agree we should coordinate. Discussions have been going on for a year and a half between the various political parties, before and after the elections, to resolve some of these issues. So we have a role to play on two fronts; one is coordination and trying to harmonize the relationship between the federal government and the region of Kurdistan and the other is the issue of long term planning for the oil sector.

Q: Judging by PM Nouri al-Maliki’s recent statements, it seems the executive has already taken steps to resolve the issues with Kurdistan.

A: I’m not sure the details are worked out. The agreement only talks about how to pay for the increased production from Kurdistan, but this doesn’t resolve the issues of the contracts signed by the Kurdish region. So the details are not there.
Q: What’s your understanding of the agreement on payments to companies working in the KRG – Mr Maliki seems to be fudging(evade/dodge) the issues in his statements?

A: There is an agreement between the minister of oil in his previous capacity as deputy minister and another agreement in his current capacity as minister of oil, with the concurrence of the minister of finance, that they have to pay the companies as an interim solution for pumping oil into the pipeline for export. That doesn’t resolve much. This is the only agreement to my knowledge. There has been talk about how to resolve the other issues. I hope there is the will from all parties to do so. My first impression is that there is a great deal of good will especially with the current political momentum.

Q: What’s your personal view on how the oil conflict between the KRG and the federal government should be resolved?

A: My view, and I started working on it, is that we need a committee of three elements; the ministry of oil, the ministry of natural resources in Kurdistan and the oil and energy committee in parliament, represented maybe by myself, to look into all the contracts signed by Kurdistan and probably even to review some of the elements in contracts signed by the federal government, and to take all these issues out of the oil and gas law so that we can move faster on it on non-controversial issues.
Q: So how would you deal with the contracts signed by the KRG?

A: This committee should discuss what to do with these contracts. There has to be the intention to cooperate on all those issues.

Q: What should be the objective of the discussion? Is it to harmonize those contracts?

A: We have 2 objectives: first to take this controversial issue [the contracts] outside of the oil and gas law. We need to get Iraq National Oil Co (INOC) law enacted and we need to have a ministry that is a regulatory body. This has been stalled particularly because of the differences on how to deal with the Kurdish contracts. If we take these contracts out, and promulgate a law which talks about whatever comes after the date of promulgation, then we would have removed all the past problems outside of the main issues at hand while the committee – and probably other subcommittees- work on resolving the conflict regarding the contracts. Then it can be taken up by the federal oil and gas council, which presumably will be enacted by the oil and gas law by then. Those issues have to be resolved in time.

Q: Do you have a solution in mind? Deputy PM Hussein al-Shahristani talked about converting the KRG contracts into service contracts. Is that feasible or realistic?

A: I’m not in a position to pre-judge what the various parties will agree. Al-Shahristani is part of the problem not part of the solution with this presumption. Also, Ashti Hawrami is probably part of the problem not the solution. We need to have all parties talking about the solution, a compromise, and move forward. But in all cases, we should not allow these differences to stall two things: to promulgate the oil and gas law and to get oil [from Kurdistan] produced and exported for the benefit of the Iraqi people. The investments have been made, people want their money, it’s a waste of…everything, to have it locked in after we have done all this. The controversy should be taken out and separated. There are different points of view and the purpose of this committee if it is agreed to – and I don’t see why not- is to reach an agreement. We have a previous experience with this issue during the Allawi government [in 2004]. At the time, I talked to the companies which had signed agreements with Kurdistan then – there were 3 at the time – and we said we need to resolve some of these issues to bring in harmony between the purpose and spirit of the constitution and what is best for the people of Iraq, Kurdistan included.

I found out it was not impossible to get the companies to agree to some framework that allows them to move forward. They have invested a lot, have taken a lot of risk, and have a lot of profit to make. I think they want to move forward. Moving forward is to the best interest of the KRG, the federal government and the people of Iraq as well as the best interest of the companies.

Q: As chairman of the oil and energy committee, what’s your plan regarding the legislation of laws?

A: Once we get agreement to start talking about the contracts, I think we can move very fast on two things; one which is the least controversial, and that is the INOC law, and one which is controversial but hopefully less so when we move out the signed contracts and that is the oil and gas law. I hope both laws can be promulgated this year. The KRG also wants the revenue sharing law promulgated soon. We have started a debate on this two weeks ago, a non-partisan debate, involving the UN and some experts. We will have another discussion with a wider group, non-controversial and non-political, on how to proceed on that. Then we will take it up in the oil and energy committee and try to get it passed once we have disentangled some of the differences.

Q: Some will object to the creation of INOC as they see it damaging to their interests?

A: Whose interest? I’m not aware of anyone whose interests will be damaged by INOC law except the position of the oil minister.

Q: When INOC law was approved by the cabinet in 2009, some in the oil ministry were not very enthusiastic because it would take a lot of the powers of the ministry. Do you think you can get it through this time?

A: We don’t have to get the oil ministry to agree unanimously on the INOC law. We have to look into the whole framework. Setting up INOC is part of the oil and gas law. The rationalizing of the sector means that the oil ministry will ultimately have to be a regulatory body. If the minister has other views, we may listen to him but he’s not the only player when it comes to what happens in the oil sector in Iraq.

Q: Do you expect the oil and gas law to be passed this year? Or is it too optimistic?

A: I am fairly optimistic for two reasons: first there has been a lot of political discussions and concurrence on resolving those issues between the main players, especially Maliki, Barzani and Allawi. Other parties talked to the Kurds as well and they promised to get things moving on all issues including all those related to oil and gas. The second reason is that I think the present parliament has a mind of its own and if parliament thinks we should move forward on rationalizing the oil sector, we don’t need to have to continue with this chaos which ended up with oil production decreasing in 2009-2010.

Q: But it’s the executive who is supposed to take the initiative and propose the laws to be legislated.

A: We have the laws and we can move on them.

Q: The old drafts need to be amended to take into consideration developments since they were voted by previous the council of ministers.

A: They don’t have to be amended by the executive as far as we are concerned. We will talk to the executive.

Q: You mean they were not withdrawn from parliament after they were sent to it at the time?

A: No. as far as I can see from the documents of the committee, they were sent to the committee and they were stalled here as the result of political differences within the committee, within parliament and within the executive. There were differences everywhere. But I don’t see the same problems arising now. So we can move them from here. Of course we will talk to the executive, if they have any new ideas. And of course I will talk to the minister of oil on INOC law if he has any new ideas. But like what’s going on with the budget at the moment, parliament has a mind of its own. Ultimately it represents the people and it has its own will. If it doesn’t like the executive, it has to throw the executive out. But it has just voted the government in and I think the government understands that parliament will cooperate as long as parliament is convinced that what it’s doing is in the best national interest and the interest of the Iraqi people. So we are not talking about getting unanimity between the executive and parliament or getting the absolute concurrence of the minister of oil on everything we do. We are talking about cooperating and the political basis for that cooperation has already been set in the discussions before, during and after the elections.

Q: Do you think parliament has to have a say, even retroactively, on the contracts already signed by the ministry of oil?

A: I think we will have to review that process very quickly. I don’t think parliament is very happy that it has been bypassed, whether by the KRG or by the federal government. But that’s not the main problem. We need to have an overall plan for the sector which is framed in the oil and gas law. It has a council that represents various stakeholders and parliament continues to supervise. If that functions properly, I don’t think parliament wants to poke its finger into everything.

Q: Once the federal oil and gas council is established, do you think it should look back at what has already been signed?

A: No, I think looking back should be taken out of the oil and gas law, just like the Kurdish contracts, and the tripartite committee I mentioned earlier should review everything. Once the federal council is set up, the committee will hand over its findings and solutions to the council.

Q: You were part of the vision that was articulated in 2004 by the interim Allawi government. Do you think any of that vision is still applicable today?

A: Yes definitely. The basic parts of that vision were to get the oil sector rationalized, to get the upstream handed over to INOC in order to carry on what we have done so far in the sector, and to cooperate with IOCs to develop what remains in Iraq, including Kurdistan. The oil and gas law takes it up from where we ended at the time in that vision. That vision also sees utilizing gas mostly for the domestic economy and for power. Nothing has been done on that. The Shell gas agreement has been so far stalled. No serious work is being done on other sources of gas, including the associated gas. Even the second bid round contracts don’t detail what happens to the gas and how the operators are to deal with it. We should rationalize that too.

Our vision was, and still is, to get the private sector involved in the downstream sector; in refining and distribution and to some extent gas. Some elements have not moved at all, for example the refining and distribution. It’s ridiculous to have the government run gas stations. Our vision was also to have a gas operator or operators acting between the producers and the various users, whether in relation to export or domestic usage. That structure is missing. We probably need several actors in the mid-stream, like what is being discussed with Shell currently – but the most important thing is to have more than one operator. When we talk about gas and the private sector, we mean after the midstream operators. Once the gas, whether dry gas or associated, is produced, the mid-stream can be done by either the government or joint ventures – preferably joint ventures from our point of view- then after that it should be the private sector handling it whether in the petrochemicals sector or whatever other domestic use. The government should not be involved beyond the mid-stream.

Q: The oil and gas committee in the previous parliament made it its main task to grill the oil minister. Would the current oil and energy committee have a different approach?

A: we don’t intend to grill anyone before we investigate and we try to find points of agreement and coordinate. We will try to get things going. If that’s impossible, we will remove the minister who doesn’t fit. The role of parliament is not to investigate, interrogate and punish. The role of parliament is to promulgate laws, supervise and see if things are totally blocked with the executive, then to remove it. We don’t want to start by antagonizing everybody. The interrogations came on the background of the sharp differences between some people in parliament and the executive, not just with the minister of oil but other ministers as well. Maybe that’s one of the things that parliament should do but I don’t think we should start by assuming that people whom we put in the executive are not fit. We put them there and voted on them. We should at least give them the chance to prove that they can cooperate and do a good job and we should try to help them if they work in that direction. If they block the will of the people, that’s a different course.

Q: What’s on the agenda of the oil and energy committee for the next few weeks and months?

A: We are meeting with [deputy PM Hussein] al-Shahristani next week and we are talking to the ministers of oil and electricity about meeting with them the following week. We want them to brief us on what they are doing, what they intend to do and how they intend to do it. We need to try to understand them and help them if they are on the right path, and tell them what we think if there are differences between what we think. We appointed them very recently. So we should listen to them first. In the meantime we have issues that are outstanding, which are past differences which we need to approach differently by talking to these people, especially the ministers of oil in the federal government and the KRG. There are some issues where we not only want to understand what’s going on, but we want to see the details such as the urgent needs in the electricity sector. We also want to discuss the problems that are faced by the IOCs which signed contracts with Iraq. We know they have problems, not only with the ministry of oil, but with other sectors in government, like with the issue of visas for example. We want to see if the legislature can solve them or facilitate them. There are problems with local governments which we can help with. We have a supervisory role on the local councils. The legislature has a lot to do, ultimately to appoint and disband governments. So it’s not a small feat. If we are serious about implementing the constitution, it’s the will of the people that should be our concern.

Q: Does the National Council for Strategic Policies (NCSP) has any role to play as far as the oil policy is concerned?

A: We have just been talking about problems that could arise with some ministers. It is there – if the legislature has no direct role to play – that some of these problems are resolved. We can bring those problems to the NCSP or it can ask the government or get involved itself to review some of those issues. So with the burden – which you think is too heavy for this committee to carry because of the politics – this is the body that will be established to resolve those issues. When there are political blocks and some of the things are being hampered by political differences, it is in the NCSP that they should be resolved. But the details are either with executive or the legislative. We then take it up from there. We are not in contradiction with our leaders, but we want to see structures that work. The NCSP can resolve general issues and some of the major political differences, but the executive and legislative have to carry on these agreements.

Q: You see its role mostly as a problem-solver?

A: Yes, we have a political structure which didn’t work during the last term of parliament because the differences were immense and some elements, especially the office of the PM, more or less usurped the role of parliament and the role of other bodies. Even the presidency council which we assumed will have a supervisory role during the interim is gone. So we need another body that can deal more seriously with issues of political conflict. Everybody is represented in this council. Parliament and its committees are not the best places to resolve some of the bigger political problems but we can carry out some of the agreements that are agreed and discussed. For example, there are agreements that were reached before the formation of the government. Where are they going to be supervised, followed and implemented? We have 10 major agreements, including the agreement to create the NCSP which is not yet carried out. There is also the issue of de-bathification and the political reform which was passed by the last parliament but never implemented. Political reform was passed with the SOFA (Status of Forces Agreement) and it was one of two issues that were conditional on the SOFA, the other one is a referendum which was never carried out. The document on political reform was brought up again after the elections and before the formation of the government and it was considered one of the documents to be carried out during this term. The NCSP has to follow up. There is also an agreement on the reform of the judiciary, and one on national reconciliation…etc. we have 10 agreed documents, of which six are detailed, signed and agreed but none implemented until now. The NCSP will have to find a way to implement them.

Q: Can the NCSP define policy?

A: Yes, there is no limitation on what it does. There is limitation on where it becomes compulsory which is either unanimity or an 80% vote of the body. Then, they become compulsory on all, including the executive, the legislative and others.


psc question /answer page on dno forum

DNO’s Production Sharing Agreements in northern Iraq.
Relevant Questions and Answers
Q. Why did DNO sign Production Sharing Agreements (PSA) with the Kurdistan
Regional Government instead of the Ministry of Oil in Baghdad?
A. From 1992 onwards, the Kurdistan Regional Government (KRG) exercised full
governmental powers on the territory of Kurdistan including managing natural resources.
The authorities of the KRG were affirmed in the 1998 Washington Agreement brokered
by US Secretary of State Madeleine Albright. The KRG and DNO signed the PSAs on 25
June 2004, before Kurdistan’s status was altered by the entry into force of the
Transitional Administrative Law..

Q. How does Iraq’s new Constitution affect the KRG-DNO PSAs?
A. The Constitution authorizes the federal government to manage oil and gas extracted
from current fields (Article 109) in cooperation with the relevant regional government.
Future fields, like the ones DNO is exploring, are not mentioned. Articles 111 and 117
state that any power not specifically assigned to the federal government belongs to the
regions. Since the power to manage future fields is not assigned to the federal
government, it belongs to the regions.
This distinction between control of existing oil (by the federal government with the
regions) and future oil (by the regions) was a critical compromise in the making of Iraq’s
constitution. It was personally negotiated between Kurdistan President Masoud Barzani
and the head of Iraq’s Oil Council, Deputy Prime Minister Ahmad Chalabi, with the
direct involvement of the US Ambassador to Iraq.

Q. Has Iraq’s Ministry of Oil approved the KRG-DNO PSAs?
A. Since the PSAs relate to fields not in commercial production, the Kurdistan Regional
Government has exclusive authority to make agreements and to establish the appropriate
legal regime.

Q. Has the Iraq’s central government approved the DNO PSAs?
A. Iraq’s new constitution validates all laws and contracts made by the KRG since 1992
(Article 137). This clause was specifically included to remove any possible legal
challenges to KRG’s contracts, including the oil contracts.

Q. What are DNO’s relations with the Iraqi Ministry of Oil?
DNO has excellent relations with the Iraq Ministry of Oil (MOO). DNO and the MOO
operate a joint committee for cooperation and DNO provides training to candidates
identified by the MOO. Iraq’s Deputy Oil Minister is the Iraqi Co-Chairman of the
MOO-DNO Joint Coordination Committee.
The MOO has been fully informed about DNO’s activities and has provided valuable
assistance to DNO, including technical information such as seismic and well data. The
MOO had a representative at the 29 November 2005 “spudding” ceremony of the Tawke-
1 exploration well.

Q, Is DNO the only company operating under PSAs signed with the KRG?
A. Several foreign companies are now operating in Kurdistan under PSAs signed with the
KRG. One company has recently made a deal to sell oil to a refinery which will be
operated by the MOO.
Q. What is the significance of Article 109 (2) which says that the federal government and
the oil producing regional governments shall together develop a strategic plan?
A. The strategic plan relates to national level issues such as managing pipelines and
keeping production within OPEC quotas. The strategic plan must be agreed by all the oil
producing regions and the federal government. Unless each region agrees, it will not alter
the constitutional bargain dividing control of existing oil and future oil between the
federal government and the regions.

Q. Isn’t there an effort to amend Iraq’s Constitution? Couldn’t this affect the validity of
A. Iraq’s constitution is normally very difficult to amend. There is, however, a four
month window in which the National Assembly can propose amendments by majority
vote to be submitted to a national referendum. The referendum rules permit any three
Iraqi provinces to veto the amendments by a two thirds vote. Because of near unanimous
support for the principle of local control of resources in the three Kurdistan Provinces, it
is very unlikely there will be any proposed amendments to the clauses relating to
management of oil.


Read the summary of a barrel of oil split (rows 28-30 on the link).
It appears that with the PSC – the main winner under the terms is the KRG. Incrementally GKPI seems to benefit comparatively little. In fact at $3 ‘Profit oil’ GKP appear better off with a $3 TSC contract.
At $8 profit oil, under my PSC ‘fag packet’ calculations GKPI appear to be only slightly better off than with $3 under the TSC calculations.
The KRG seems to be the main winner under the PSC, mainly at the expense of the ICG.
I am probably missing something glaringly obvious – after all the theater over the last 2 years
they'll get 3-5 $/barrel
not more

is it not correct that psc are more valuable to companies and would help Gkp achieve adjudged takeover price as the reserves can be put on the balance sheet unlike tsc. This I believe is an important factor so I hope the psc remain although will be happy when sorted one way or another so a value can be put on companies operating in the region. With Maliki saying he understands Kurdistan is more difficult terrain I would expect good terms if changed to tsc. 6- 8 dollars range I would guess or hope for .
PSC's the reserves can be quantified in the balance sheet,but in any TO,it is the concession period and the net USD per barrel after all costs thats more important.

As such in the worst case scenario a TSC may not be that bad and Maliki himself have been consistent that, the contracts in kurdistan should have a higher profit per barrel than the southern provened fields contracts because the risks are much higher.

However,IMHO the KRG will want to keep the PSC structure and hence the profit per barrel to the PSC's holders will come from the KRG!This provides the
KRG with more flexibility in the future rather than get themselves tied down with TSC,after all,if the Kurds had their own oil pipeline,this will never be an issue.
Personally I am more interested in how the contractual difference affects GKP (and us) relative to my thoughts of PSC enabling them to generate % proven bookable resources/asset effectively owning a piece of the valuable pie Vs Service contract being paid % for oil recovery of known reserves, as I said in previous posts that the mindset of the IRG (Mr S) is that the oil belongs to the people of Iraq thus a TSC means you own nothing until it is in the pipeline, a PSC would be like them allowing an international to effectively own a portion of that.

I do not know ( if the above was the case) how a TSC would affect the value of a T/O bid with Majors looking to top up their own total reserves, OK the underlying result is they or GKP would have a massive cash cow at production stage regardless and that is the end play regardless of what kind of contract it is under.

As far as payment is concerned, I can only see a little difference between a PSC & a TSC.

IMHO, the difference is in the classification of an Asset (PSC) or a Contract (TSC).

An Oil Asset is bought at xxx, and its Value built up by Exploring and Appraisal Drilling, and converting that Asset into Reserves.
At that point the Asset is revalued on booked on the Company Balance Sheet and revalues the Company.

Under a TSC, IMHO, the Company is just a Contractor, paid per Barrel, with Costs paid from each Barrel.
At no point would the Company have an Asset on its Books, just a Contract.

With a PSC and an Asset, the Company has a Value that can be bought out.

Under a TSC I can only see GKP carrying on into full production, to increase its value

PSC = Asset Based. = worth buying in a short time
TSC = Production Based = worth buying when full production is reached, so a long time

All IMHO of course.

IMHO, it is not that the KRG is better or worse off under the PSC's compared to TSC's. That IMHO, is nothing to do with us and GKP, and is a separate struggle for the KRG.

After all, the Payments go to the ICG, who share the money out to the Regions on a Population basis.
The KRG will get its share per Population plus its 1% per Barrel Royalty, as a straight deal.
Whatever is agreed within this present Budget, will be altered after a Population Census is carried out, and the KirKuk issue sorted, and KirKuk in or out of the KRG Region

The KRG has as you say, fixed the PSC Profits to their benefit, with all the different Payments made by the Companies.

Just a short list of the Benefits to the KRG from their Population percentage.

Production Bonus payments by the Companies, at 6 set percentages.
Infrastructure Payments for Schools, Uni's, Hospitals.
Free Training paid by the Companies
Numerous other Taxes as in DNO PSC License.

IMHO, the Contracts are Legal, and the same Profits will have to be paid as per Contract.
By who does no matter.

What does matter, is that a PSC as an Asset can be valued by the Oil found, by the Market or a Buyer at any time.

A TSC is a Contract rather than a License, and only Production can be valued by the Market or a Buyer.
Full Production will take Years with Funding required and Dilution, and the subsequent increase in shareholder value moving with Production.

IMHO, a TSC will not be good in the short term for GKP as a small Company.
The TSC is more amiable/ beneficial to large Companies wanting Profit to satisfy it Shareholders, and their Dividends

All IMHO of course.
a PSC definitely sounds more attractive than a TSC from what I've read, but there is no doubt that a contract is very much a valuable asset in its own right - at the end of the day, the value of both a TSC and a PSC is the cash flows they generate, and you don't need to own an asset to generate revenues from it. If you think about Mitie and other contracting businesses, whilst they do have some assets, their real value is in their long-term contracts.

Therefore whilst the PSC/TSC distinction may have an impact on the value of a takeover, I don't see it having an impact on the timing of it. At the end of the day, the acquirer will perform a discounted cash flow calculation of some sort whether it's an asset or just a contract.

If PSCs are converted to TSCs they'd need to be direct with the ICG. It wouldn't be helpful contracts converted then KRG/ICG had a spat and oiler ended up being hit by a non-performance (production target) penalty for not pumping oil due to wrangles over who's paying what.

Best solution imo would be to amend PSCs, cutting out KRG's particpation, so that ICG receive everything and pay oilers their full cut. KRG get their 17% of total ICG oil + $1pb producer region payment not 17%+$1pb+a chunk of PSCs which IS unreasonable to the rest of Iraq.


Author scaramouche View Profile | Add to favourites | Ignore
Date posted Sunday 19:39
Subject One small step...
Votes for this Posting Voted 85 times.
I agree with Balone that we seem to have Step 1 out of the way, with the Iraqi budget agreed, and this SHOULD be good news. But, as is customary with Iraqi politics, the announced level of detail continues to be rather vague and leaves us all having to speculate!

But I think it is possible to deduce some details which may help us to understand better what has happened.

1. The Iraq budget has been agreed for $82.6 billion – since the Kurds get 17% of the budget, this must also surely mean that they will have an income of $14 billion this year.

2. To achieve their $14 billion, they are required to produce 100,000bopd and, since they are already up to about 80000 bopd from DNO (50000) and Addax (30000), I have little doubt that this will be achieved.

3. Hawrami has stated recently his expectation that Kurdistan will produce 250,000 bopd by the end of 2011. Some reports say 200,000 but I certainly think it reasonable to assume that an average of 150,000 bopd is realistic and attainable. If Kurdistan does produce an average of about 150,000 bopd and receives their extra $1 for each barrel produced by their region, this adds a further $500 million to their total income.

At this point we can therefore realistically conclude that the KRG will receive about $14.5 BILLION out of Iraq’s total revenues. Please keep this figure in mind.
Let us turn now to the payments that need CONTRACTUALLY to be made to producers...

The 2011 budget allocates $2.05 billion to “oil firms’ investment costs” for 2011.

We know that Iraq’s budget is based on 2.2 million bopd for export. But it is producing 2.7 million bopd in total, as there is also the need to cater for the local market. This will be enhanced by Kurdish output and increases in production in the South of Iraq, such that an average of about 3 million bopd in total for 2011 seems reasonable.

This figure amounts to about 1 billion barrels for 2011 in Iraq and Kurdistan, which essentially indicates payment of $2 'costs' per barrel. This fits in well with the commonly referred to "$2 or so" which has been mentioned as the cost of extracting oil from the ground.

So there is nothing there to suggest that any other costs that oil companies incur are being covered. But don’t worry – this is the likely explanation IMHO...

The way I see it is that the ICG has to pay their oil companies the $2 costs, PLUS the amount due under their TSCs. Those additional costs will presumably come from their 83% of the Budget.

The same must logically be true of Kurdistan. Since the $2 per barrel appears to relate to the ‘costs’ that the ICG has agreed to pay towards the companies operating in Kurdistan, the ‘profit oil’ component must come from somewhere else. The question is where..

Well, if the ICG are paying their contractual dues out of their 83% of the budget, it makes sense that the KRG will be paying the companies operating in Kurdistan out of their 17% (or $14.5 billion) share of the Budget. That makes everything FAIR, irrespective of the differing views on the Contracts.

Going back to the idea that Kurdistan will produce 150000 bopd this year, we can now also have a reasonable stab at what the profit oil element will amount to.

I realise that the oil price is currently nearer to $100 but, to keep everything consistent with the budget, let us use the $76.5 per barrel referred to there.

Assuming costs of say $10 for extraction, transport and storage, the profit on each barrel of oil exported should be about $66.5. And the profit oil payment due under the Kurdistan contracts is in the region of 13 – 15% (based on examples I have seen to date). So we are then looking at up to $10 profit oil per barrel extracted, being payable to the companies operating in Kurdistan. Again, this figure sounds reasonable.

Assuming 150000 bopd, the overall cost to the KRG this year would then be 150000 x 365 days x $10, which comes out at about $550 million.

And remember that the KRG will be receiving $14.5 billion income this year, so the payments due to the exploration companies would be less than 4% of that figure.

Of course, the eagle-eyed amongst you will note that, in the early stages, the oil companies should be receiving much more than $10 per barrel as recovery of costs will be at an accelerated rate.

Ewen Ainsworth spoke of receiving about $15 initially when oil was around $30 per barrel on the local market, so it would probably be nearer to $20 based on current prices.

So, perhaps the KRG will need to pay double the $550 million calculated above to the oil companies in the early stages of production... or just over one billion dollars.

This is still < 8% of income and IMHO very manageable, especially given the many bites of the cherry that has been discussed at length, and especially the 40% ISP tax which the KRG will be getting back, which means that ultimately they only need to cover up to $6 per barrel, using the above calculations.

**** We now have indications of $2 costs being paid by the ICG and probably $6 by the KRG (after tax) at $76.5 per barrel, which is practically no different to what those TSCs with an exploration element involve ***

So, in conclusion, I strongly believe that the Budget has allowed a mechanism for paying the Oil companies what they are due, is fair to both the ICG and the KRG, and is well within the remit of the KRG’s 17% of the overall budget.

All that therefore really needs to happen now is that DNO and Addax confirm that they are receiving exactly what they are due under the PSCs, and that GKP does the same in due course, as they gradually increase their production to the local market... and, in a way, we don’t need to see the contracts being ‘ratified’ at all!
Okay, the last comment is slightly tongue in cheek – like everyone else, I would very much prefer to see FORMAL Ratification... but IMHO the building blocks are now there to allow all parties to agree and, very importantly, save face.

So, will the SP rise tomorrow? I’ve absolutely no idea since this is GKP after all, but we are now surely heading in the right direction!

One small step for Iraq and Kurdistan... but perhaps it is one giant leap for GKP!

AIMHO and please DYOR
GLA, scaramouche

Well, if the ICG are paying their contractual dues out of their 83% of the budget, it makes sense that the KRG will be paying the companies operating in Kurdistan out of their 17% (or $14.5 billion) share of the Budget. That makes everything FAIR, irrespective of the differing views on the Contracts.


Scaramouche. I'm in total agreement regarding what's fair and the KRG probably should pay the Profit out of their 17% budget allocation. Historically the KRG have demanded that the ICG should pay this on top of the 17%. It's funny how over time we've with extended research even as shareholders we can see that the KRG demands are maybe too much


As Scaramouche did yesterday, I am attempting to work out what DNO got paid for their December Production by the Kurdistan Market.

DNO state their Working Interest (WI) as 20,885 and Net Entitlement (NI) 13,675, for both the Yemen and Tawke Oil Fields, with an average price of $54 per barrel, and give the split of the two fields below.
DNO give the price for their Yemen Production as $97 per barrel with no figure for the Tawke Production

Yemen ………………..…Tawke
Gross Prod…16,128.…….16,226
DNO .. WI .. 6,281, ……..DNO .. WI .. 14,604
DNO .. NE - 3,939, ……..DNO - NE .. 9,736

Total WI Production of 20,885 being the sum of 6,281 + 14,604 @ $54 pb = $1,127,790

Total NE Production of 13,675 being the sum of 3,939 + 9,736 @ $54 pb = $738,450

Yemen ..WI..6,281 x $97 = $609,257.
Total..WI..$1,127,790 - $609,257 = for the Production from Tawke $518,533.
The $518,533 divided by the Gross Production of 16,226 = $31.95 per barrel

The Total Tawke Production is worth $518,533, of which 10% IMO(In my opinion) the KRG gets
The DNO..WI..= 14,604 x $31.95 = $ 466,597.80, of which is split with Genel, and Genel receiving $155,532.60
The DNO..NE..= 9,736 x $31.95 = $311,065.20, which equates to DNO’s percentage

I don’t know the DNO Contract situation, but the figures below prove that the Gross minus as shown, show how the WI and NE figures have been arrived at. Both the 10% and 40% are taken from the Gross figure.

The Tawke Gross Production of 16,226 - 10% = the WI of 14,604
The Tawke Gross Production of 16,226 - 40% = the NE of 9,736.

From the Gross Monthly Figures for November Production of 16,226 from Tawke, taking the DNO Net Figures, they get $311,065.20, divided by 16,226 = $19.17 per barrel. I expect the figure of $19.17 to possibly include some Cost Oil Component
That figure may or may not be Net of Taxes, though I have assumed it is.

Equating those figures to Shaikan, and saying 12,000 barrels per day.

20% KRG, 20% MOL, 60% GKP

12,000 x 60% = 7,200 x $19.17 = $138,024 less of course any possible Taxes.

At this point, I will leave those more able to pick through my figures and correct them.

Please DYOR.
PS. Scaramouche. My figures are quite similar to yours. Please check mine out. Thas better than me.

Sun 23:14 Re: One small step... inthefield 1

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I have to disagree with scaramouches theory.There is no way KRG ever anticipated paying PSC profit oil out of their own money.They expected to pass that liability to ICG and also benefit further by back in rights,social payments etc.
Whilst oil production from kurdistan is low then yes they could swallow the extra costs of paying profit oil because they would be getting 17% of all Iraq oil revenues and only paying profit oil on much less than 17% of it.
However it seems there is both pressure and probably ability soon for Kurdistan to produce as much or more than 17% of oil.I leave you to do some sums to see what result occurs.Basically they would get a large budget payment but would pay quite a high amount to the PSC contractors
but would end up much worse off pro rata than the rest of Iraq.This is a non starter sad to say.
I dont think ICG will let KRG get away with more than their fair(ie pro rata) share of oil revenues and I dont think KRG will go down the road of ending up with less than their pro rata share (after any payments tto the PSCs)
Common ground appears to be for the KRG to give up their "over" benefits and ICG to accept -as Maliki seemed to initially say- that explorers risk and the terrain differences in Kurdistan warrant a premium price per barrel
compared to the south.The PSC,s obviously do that for the contractors or they would not have accepted the contracts.

Iraq to suspend law raising tariffs amid demos
Middle East political unrest Business Foreign 2011-02-21 16:42

BAGHDAD, Monday 21 February 2011 (AFP) -

Iraq is looking to suspend a law that was to be implemented in two weeks raising tariffs on imports, a spokesman said Monday, in the latest move by the government to head off protests.
The announcement came a day after Iraqi lawmakers voted to reduce their salaries and that of ministers by 10 percent, and to increase allocations of food for the needy.

"The council of ministers has authorised the secretary general of the cabinet to prepare a bill to suspend the work of the tariffs law until further notice," government spokesman Ali al-Dabbagh said in a statement.
The tariffs law was originally passed in December, before uprisings in Tunisia and Egypt sparked protests across the region, including in Iraq where demonstrators have railed against widespread corruption, high unemployment and poor basic services such as food and water.

It had been due to come into effect on March 6, and would have allowed Baghdad to protect local industries as its moribund economy slowly grows following decades of violence and sanctions.

Duties were to range from zero to 80 percent of the value of products being imported. Tariffs for rice, sugar and antibiotics were set at five percent, while duties for cars were 15 percent.
The law replaced a variety of past regulations, including some dating back to the time of the Coalition Provisional Authority (CPA), the occupation authority charged with administering post-invasion Iraq.

In Order 12, originally signed June 12, 2003, the CPA suspended tariffs on all products, notably leading to a massive influx of used cars.

Order 38, signed in September 2003, created a "reconstruction levy" -- a single tariff of five percent on all imported goods except food, medicine, books, clothing and products related to humanitarian assistance or Iraq's reconstruction.

Notable exceptions included products used by the CPA, coalition forces, their contractors and foreign governments.

MySinchew 2011.02.21


From 24 June 2009 Rns on Shaikan 1,

Currently the well is drilling 17-1/2" hole at about 1100 metres towards the planned intermediate casing point at 1350 metres. Oil shows have increased significantly as the larger hole approaches the deeper portions of the pilot hole. After setting the 13-3/8" casing at 1350 metres, GKP plans to log the remaining portion of the open hole down to 1510 metres. It is this lower portion of open hole that has shown indications of porosity and from which we believe the oil inflow originates. Pending log results, a limited flow test may be warranted.

Then 43 days later we had the Significant Oil Discovery Rns on 6 August.
which was 3 days after the dodgy placing at 9p.(as if they did'nt know then)

31 january Rns,

Sheikh Adi - 1

The Sheikh Adi-1 exploration well is currently at the 13.375 inch casing point at the bottom of the Cretaceous interval after side tracking around a section of the bottom hole assembly that had become stuck in the open hole. The forward plan is to set 13.375 inch casing and drill out into the top of the Jurassic age formations and the first of the primary exploration targets for this well.


The Shaikan-2 appraisal well (9 km east of Shaikan-1) is currently drilling 17.5 inch hole at approximately 1,210 metres. The forward plan is to drill to the bottom of the Cretaceous interval, set 13.375 inch casing and then drill into the first of the Jurassic age target intervals.

So if Sheikh Adi-1 was at the 13-3/8 casing point 21 days ago,I would think some news within the next 2 weeks is looking good with Shaikan-2
close behind.


Iraqi Kurdistan opens new oil refinery

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0diggsdiggEmailPrintRelated NewsSuicide bombers kill 21 in northern Iraq
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Tue, Aug 11 2009
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Iraq's Taq Taq oil output 20,000 - 40,000 bpd
Fri, Jul 17 2009
1 / 3 U.S. Ambassador to Iraq Zalmay Khalilzad (L) and Iraqi Kurdistan Prime Minister Nechirvan Barzani (R) put the last touches at Khurmala oilfield in Arbil, 310 km (190 miles) north of Baghdad July 18, 2009.
Credit: Reuters/Azad Lashkari
ARBIL, Iraq | Sat Jul 18, 2009 3:31pm EDT

ARBIL, Iraq (Reuters) - Iraq's largely autonomous Kurdistan region opened a new oil refinery on Saturday, with a projected capacity of 40,000 barrels per day (bpd), the director of the group that built the refinery said.
The refinery near the Kurdish capital Arbil is run by private Kurdish group Kar, which will process crude from the Khurmala Dome oilfield, its director Baz Karim told Reuters.

"The (Kurdistan Regional Government) will pay us for what the refinery produces. Our capacity is now 20,000 bpd but it will be 40,000 bpd by the end of the year," Karim said.

As well as producing gasoline for cars, the refinery will make kerosene, heavy fuel oil, diesel, paraffin and airplane fuel, Karim said.

The northern Kurdistan region, hoping to quickly develop its oil and gas sector, is entrenched in a long-running feud with the central government in Baghdad over energy contracts Kurds have signed unilaterally with foreign firms and which Baghdad deems illegal.

Last November, Oil Minister Hussain al-Shahristani said that development of Khurmala to supply refining in Kurdistan was a priority. The Oil Ministry was not immediately available for comment on the Arbil refinery opening.

(Reporting by Shamal Aqrawi; Writing by Tim Cocks; Editing by Victoria Main)


Analysis: Protests alter political landscape
As Iraqi anger continues to burn in protests across the country, the political climate is rapidly changing.
Prime Minister Nouri al-Maliki has set a 100-day ultimatum for his cabinet — show progress, or else — and three provincial governors have already resigned amidst the pressure. Both Maliki and Osama Nujaifi, the speaker of parliament, are now pushing Iraq’s lawmakers to force new provincial elections, two years ahead of schedule.
“We have direction from the prime minister to b…

Fallujah government buildings set on fire by protesters on Feb. 25, 2011. The local government resigned soon after. (STAFF/Iraq Oil Report)
By Ben Van Heuvelen of Iraq Oil Report
Published March 1, 2011
As Iraqi anger continues to burn in protests across the country, the political climate is rapidly changing.

Prime Minister Nouri al-Maliki has set a 100-day ultimatum for his cabinet — show progress, or else — and three provincial governors have already resigned amidst the pressure. Both Maliki and Osama Nujaifi, the speaker of parliament, are now pushing Iraq’s lawmakers to force new provincial elections, two years ahead of schedule.

“We have direction from the prime minister to b…

Beiji back up, repair will take months
Insurgents who bombed Iraq’s largest refinery early Saturday morning targeted specific locations on three crucial units, drastically reducing capacity for at least 45 days and perhaps as long as three months.
The Beiji refinery, in northern Salahaddin province and in an area once controlled by al-Qaida in Iraq, is taking in just 75,000 barrels per day (bpd) as of Monday, a top refinery official said – just one quarter of its nameplate capacity of 310,000 bpd.
In interviews with top offic…

A U.S. soldier patrols the Beiji refinery Jan. 18, 2010. It's now under Iraqi control. (AYMAN OGHANNA/Iraq Oil Report)
By Ben Lando of Iraq Oil Report
Published March 1, 2011
Insurgents who bombed Iraq’s largest refinery early Saturday morning targeted specific locations on three crucial units, drastically reducing capacity for at least 45 days and perhaps as long as three months.

The Beiji refinery, in northern Salahaddin province and in an area once controlled by al-Qaida in Iraq, is taking in just 75,000 barrels per day (bpd) as of Monday, a top refinery official said – just one quarter of its nameplate capacity of 310,000 bpd.

In interviews with top offic…


Iraqi Kurdistan more divided after protests
Mon Feb 28, 2011 5:11PM
Matt Frazer, Press TV, Arbil
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Iraqi Kurdistan is divided linguistically between the Bahdini-speaking northern areas, and the Sorani-speaking southern areas. The former is a stronghold of regional President Mesud Barzani's Kurdistan Democratic Party, or KDP, and the latter mainly the domain of Iraqi President Jalal Talabani's Patriotic Union of Kurdistan, or PUK.

In recent years however, the traditionally more liberal Sorani-speaking areas in the south, have lended many of their votes and support to the reformist Gorran list - the main opposition group supportive of the recent protests.

While the two major parties, the KDP and PUK, once fought a bloody Civil War over territory, they now govern the region in a coalition, which divides Iraqi Kurdistan into two separate administrations, with separate military and security services, separate universities, separate media outlets, and evidently, separate political aspirations.

The more tribal, conservative Bahdini-speaking areas, loyal to the Barzani family and the KDP, have not seen any demonstrations. In the capital Erbil, which the KDP wrested from PUK control during the Kurdish Civil War in the mid 1990s, the authorities have severely restricted the activities of opposition supporters, and the streets only saw a very minor government-sactioned, pro-KDP, pro-Barzani demonstration.

Observers here say, What we are now witnessing is not a Civil War fought with firearms, but a continuing Civil War fought with words and at the ballot box.


Christopher Thompson, 23:10, Tuesday 28 December 2010

Gulf Keystone Petroleum, the Aim-quoted Iraq-focused oil explorer, is targeting a move up to the main market in the first half of next year.

"We are talking to the regulators about whether it's possible," said John Gerstenlauer, chief operating officer. "It is not easy to go up to the FTSE as an explorer; the regulators want to see some [oil] reserves."

If admitted to the main list, Gulf Keystone (LSE: GKP.L - news) , which has a market capitalisation of £1.25bn, would move straight into the FTSE 250 (news) . It would also be one of a select group of companies that has moved upwards from Aim in spite of not yet having turned a profit nor pumped any oil.

In spite of having no proved reserves, Gulf Keystone shares have risen sharply since an August 2009 discovery at its Shaikan well in Kurdistan - ballooning from 27p to a peak of 193p in mid-November (Berlin: NBXB.BE - news) .

In the process, Gulf Keystone has been transformed from a run-of-the-mill explorer - its average share price was 15.8p in the year preceding the Shaikan discovery - to one of Aim's largest companies.

Along the way it has accrued one of the industry's biggest retail followings, and its regulatory news announcements are among the most read on Aim and a regular topic of investor discussions boards.

Yet in several respects Gulf Keystone resembles many other explorers. Its (Paris: FR0010370163 - news) resource estimates, ranging between 1.9bn and 7.4bn barrels from the Kurdistan assets, remain just that: educated guesses based on probability.

Moreover, the company that conducted the assessments, Houston-based Dynamic Global Advisors (DGA), is virtually unknown in the industry.

Gulf Keystone is yet to make any money for its investors, which include institutions such as Prudential (LSE: PRU.L - news) and Halifax.

For the six months to June 30, the company's pre-tax losses narrowed to $3.1m (£2m) from $5.6m in the same period in 2009.

But none of those issues appear to concern Todd Kozel, chief executive, who grew up near Titusville, Pennsylvania, the 19th century US birthplace of the modern oil industry.

"[Shaikan] is the crown-jewel of Kurdistan. DGA are explorationists, they're much more willing to talk about potential. We've got a big resource range because we've only drilled one deep well on a 150 square kilometre concession," said Mr Kozel, who was paid an annual salary of $2.6m and up to £3.75m in shares, according to the 2009 company accounts.
Uncertainty over Gulf Keystone's prospects has not damped investor appetite.

In October, the company raised $175m to accelerate its Iraq-based drilling programme in a surprise share placement.

The money, which is being used for appraisal drilling on Shaikan as well as for exploratory drilling on neighbouring concessions, came several months after Mr Kozel said that the oil explorer was now well-funded "through to the summer of 2011".

The move followed an $189m fundraising from investors to pay for drilling and exploration in Kurdistan.

Like other explorers in Iraq, Gulf Keystone's fortunes remain hostage to the country's turbulent politics. But there are hopes that the coalition government in Baghdad will agree on new oil-revenue sharing laws that would allow for exports abroad by 2011.

In March, Gulf Keystone shares fell nearly 10 per cent after it was forced to bail out its local partner, Etamic, which had defaulted on a $40m payment to the regional Kurdish government.
The company has since disclosed little about the identity or beneficiaries of Etamic, leading some analysts to question its transparency standards.

Mr Kozel dismissed such concerns. He said that the company was concentrating on getting test production of 8,000 barrels a day from Shaikan in January in preparation for the main market.

"On the main market we get a better premium if there's a takeover. We're an example of why Aim was created, so [moving upwards] is a natural progression," he said.


AMMAN -(Dow Jones)- Iraq's oil exports rose to 2.202 million barrels a day in February, the highest rate reached since the U.S.-led invasion in 2003, and an increase of 1.9% over figures of the previous month, head of the state oil marketing company, or SOMO, said Tuesday.
Falah Alamri also said that Iraq sold its crude oil at an average price of $97 to $98 a barrel in February, compared with an average of $90.78 a barrel in the previous month. That means Iraq would earn some $6 billion to $6.042 billion, he said. In January Iraq earned some $6.082 billion the highest in a year.
The SOMO head said there was an increase in February's exports from oil fields in northern Iraq due to the resumption of oil exports via the semi-autonomous Kurdish region. Some 494,000 barrels a day were exported from Kirkuk and Kurdish oil fields in February compared with 419,000 barrels a day in January.
The Kurdistan region resumed oil exports in February after a one-and-a-half year suspension at just shy of 10,000 barrels a day and the flow is now between 60,000 and 70,000 barrels a day, Iraqi oil officials said.

-By Hassan Hafidh; Dow Jones Newswires; +962 799 831 831; hassan.hafidh@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=U5gsMgW9KUd2c1wvsGwbdw%3D%3D. You can use this link on the day this article is published and the following day.
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March 01, 2011 02:50 ET (07:50 GMT)


Tension prompts curfew in Iraq's KirkukThu Mar 3, 2011 3:3AM
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Iraqi authorities have imposed a temporary curfew in the city of Kirkuk to prevent planned demonstrations as tensions escalate among Kurd, Arab and Turkmen residents.

Many experts have warned that a political crisis caused by the ongoing tensions among the Iraqi minorities might lead to a civil war in the northern oil-rich city, a Press TV correspondent reported from Kirkuk.

The curfew, which was imposed on Tuesday and later lifted, prevented the occurrence of a planned Arab-led demonstration in the disputed city, which is surrounded by 8,500 Kurdish peshmerga forces newly stationed upon orders by the autonomous Kurdistan region's government.

It seems that the situation in Kirkuk has been destabilized again at a time when Iraq is witnessing a wave of protests across the country.

The Arabs in Kirkuk have organized a number of protests, demanding the government to provide them with better services and open more projects to tackle the unemployment which followed the US-led invasion of the country in 2003.

Analysts believe that the curfew aimed to prevent the occurrence of demonstrations, but the government claims the terrorists were planning to attack the protesters and the curfew was meant to protect the citizens.

Meanwhile, Turkmen lawmakers and officials described the presence of Peshmerga troops as unconstitutional. They argue Iraqi security forces have the capability of dealing with the situation by themselves, and claim that the Kurds have the ambition to take over the city.

In a joint press conference, Kurdish and Turkmen lawmakers from Kirkuk described the political situation in the city as very sensitive and stressed the need for provincial elections in the city.

The head of the Arabic Front in Kirkuk's provincial council stated that the US presence in Kirkuk is considered as one of the main obstacles to stability in the region.

He blamed the United States for creating instability by supporting the Kurds against the majority Arabs and the Turkmen minority.


Just before Christmas, GKP's SP stood at about 185p. Maliki had just formed his government, the new Oil Minister (Luaibi) was talking of "integrating" the Kurdish Oil contracts into Iraqi Oil and Gas Law, and there was an expectation of Oil Exports resuming from Kurdistan. The momentum was clearly with GKP, and all that was needed it seemed was for clear evidence that the poitical impasse was at its end.

Then came the Rejection of Legal Claims RNS which initially took 30% off the SP (as Excalibur was allegedly claiming 30%), but we saw the SP rebound quickly to 168p, only 10%. It seems reasonable to assume that Excalibur is therefore currently holding the SP back by about this figure.

We then had the first apparent confirmation that Maliki was prepared to accept the Kurdish contracts, and the SP rose sharply by 20% to around 200p. Shahristani's intervention and the subsequent retraction of the statement saw the SP back to around the 170p mark, essentially unchanged. So, it is reasonable to assume that mere "Recognition" of the contracts would add around 20% to the SP.

Since the 170p days, Middle Eastern turmoil has assisted in taking the SP down to 140'ish, so it is reasonable to conclude that the uncertainty there has set us back a further 15%.

Now, let us contrast how the brokers seem to view GKP.
The average Target price of the 5 brokers who cover GKP is 200p -
Goldman Sachs has set 234p, Mirabaud 215p, Fox Davies 200p, Daniel Stewart 200p and Evo 150p .

Goldman also said that they saw "no downside" at 172p and was applying a 40% discount to GKP's value in its 234p price target. This was before the problems with Libya flared up and hit share prices across the board, largely because of the potential damage to the Oil supply. So, it looks as though there is indeed about a 15% discount being caused as a result of Middle Eastern unrest.

Taking the Goldman figure again - 234p including 40% discount due to political concerns exclusively in Iraq/Kurdistan, is the equivalent of 390p without any risks. I don't believe that this target was adjusted on the basis of the Excalibur claim, which most City analysts do not expect to stand up. So, a 390p level if all the current risks were removed sounds reasonable.

Compare GS's 390p (without any risk) to the current 145p with all of these KNOWN risks and you can see that there is a rather hefty 65% discount being applied.

And turning this on its head, you could easily deduce that, EVEN IN THE ABSENCE OF any further positive information from Shaikan -2 (OWC and upgraded OIP figues), Sheikh Adi (OIP figures), seismic confirmation for Shaikan and Sheikh Adi, Ber bahr, Bekhme.... etc. etc., the SP could easily rise 150% to 350p or so as the political and legal risks subside.

Is it any wonder that the directors have performance targets that involve options from 275p to 375p?

The current situation is certainly worrying but, as time goes on and the drill bit keeps turning, IMHO many PIs-Portfolio Investment will soon look back at these days and realise just how exaggerated the decline in the SP has been.

GLA, scaramouche

cameronian 1

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Excellent post Scaramouche - better researched than I could achieve. The only thing I would add is that one of your closing sentences "as the political and legal risk subsides" covers a multitude of sins. I think your analysis of the value WITHOUT these elements is spot on, but I do think that we shouldn't be too glib(Performed with a natural, offhand ease: was fascinated by his unfailingly glib conversation.
Characterized by fluency of speech or writing that often suggests insincerity, superficiality, or a lack of concern.
) about discounting those risks - they may be around for a very long time, and they may get considerably worse. (I should also add that on balance I expect current problems to be resolved sooner rather than later, but I am mindful that the opposite could be true)


"Over the last few days, thanks to stock like Gulf Keystone Petroleum [GKP], we have seen what is a perfect example of bulletin board ‘ramping’.

Small investors frequent bulletin boards such as iii, ADVFN and many others looking for advice on what, when and how much to invest in a stock. But they fall, victim to ’share rampers’. These guys spend hours talking up the prospects of a particular share like Gulf Keystone Petroleum in the hope that misguided investors, who have not done their own research, get caught up in the hype and start buying shares in a panic.
On closer inspection of the actual trades going through during this process, we find they are from small investors jumping in at a price that is already too high. A classic rookie mistake. Take care.

Since Friday morning a small group of bulletin board gurus have been frantically trying to talk the price up. As a virgin trader I prefer to ignore the bull**** and look for real news about a stock. At the end of the day after all the ramping subsides so will the price. You decide when a stock is at a good price to buy or not, don’t make expensive decisions purely based bulletin boards they can be a shark pit.

Now to put my comments in perspective, I think [GKP] is a great stock and I bought some myself last week at a higher price than I would have liked. The point I am making is not that it is a hyped share; it is that rampers serve no purpose but their own"


With GKP Institutions fall into catergories , as do the Private Investers.

With the many of the large Private Investers, it has happened by accident.

Institutions & Funds, High Net Worth Individuals, Medium Net Worth Individuals and us minions, plus one last category, the Traders. We have all had the chance to acquire cheap shares in GKP.

With Institutions there are several different types in GKP.

a) GKP’s Main long term Institutions.
They took the Primary Listings, like the Fully Subscribed 25th May & Over Subscribed 10th October Fundings, like the M&G (Pru) Fund, and are GKP’s Long term Shareholders, who trade a percentage of their shares, as they see fit.
Their Shares come on to the Secondary Market, only when they sell them, which is where we can buy & sell them. They are the more thoughtful traders of their stock, trading their shares on a longer term trends.

When any of these Institutions Sells Shares, they “have” to do so behind the Book, which non of us see, or even realise it is happening. That is one of the Rules of the Stock Market, put in place as Selling or Buying by

Institutions can have a material effect on a Companies Share Price.
With GKP, probably because of its Bermudian Registration, we never find out of these changes, and only on some sites do we find out months later.

b) Medium Institutional Shareholders.

They hold a few million shares, like JPMorgan, 9.75m, Bailie Gifford & Co, 4.15m, and can incease or decrease the holdings by a percentage, or as a whole. They trade their shares more frequently than our long term holders.

These are Institutions who can only Buy & Sell on the Secondary Market just like us, having not been invited to a Funding, and again, the same Rules apply, they “have” to trade behind the Book, as their dealings can materially effect the share price.

c) Small Institutional Share Holders, holding up to a few million, like SVM Asset Management Ltd, who held 1.68m shares, and AXA Investment Managers, who held 1.21m shares.
Once more these are controlled by the Rules of the Stock Market, and “have” to deal behind the Book.
They are the quick Buyers and Sellers, the frequent traders of the Institutional world

Between Jan 2008 & March 2009 many of the Institutional Shareholder sold there shares in GKP. Private Investers left as well, leaving GKP’s share price at approx 4.6p.

This was when the accident happened, and a combination of circumstances, which resulted in the opportunity that we all had, and our fundfemale could see, along with many others. The end result being, many PI’s, some holding millions.

This was the time I re-entered the Market, and it is a fact, that there was so many opportunities around, it was bewildering, of which, I chose the Banks, and made a killing, re-entering my long time favourites Aim’s Oily’s later.(AIM=Alternative Investment Market )

So in March 2009, we all had the chance to Invest in the Stock Market and GKP, but for our own reasons, we did not so some arrived late.

High Net Worth Individuals & Medium Net Worth Individuals, and many minions, acquired shares very early in the GKP Story.
Some acquired many millions, with at 10p and less per share, they saw them as excellent value. Boy oh Boy where they correct.

At 5p, £100k would have bought 2,000,000, at 10p, 1,000,000, and many spent far more. At 5p, £10k would have bought you 200,000, and at 10p, 100,000.
Multiply those holding by 10, and thats what could have been bought by CFD(Contract For Difference) back in March 2009, whilst since, they need multiplying by four.

Many of us now have far more money in GKP, than the above amounts by buying right now, with £10 representing 7,142 shares.
If I could laugh, it would turn into a scream, boy oh boy did I miss out.

How many of you would have risked all at 10p and no Drill Bit in the ground.

All of the above Private Investers, can only Buy and Sell on the open Market, and our trades are there to be seen by all.
They are reported during daily trading, or as delayed trades, some five days old, which is the max for reporting trades. Many late reported trades are hard to define as Buys or Sells, so we all try to assess or guess, lol.
They have to trade via their Brokers, and through a Market Maker, or by CFD and via the Book, depending how they trade.

d) High Net and Medium Net Worth Individuals.

These folks, many who hold several million shares, do trade them. They hold them in actual shares, and by CFD. These we can see, and there are no Rules to obstruct them from Buying or Selling, except one.
That obstruction is if they trade by “O” (ordinary trade), which as such is the size of their holdings, they have to go through a Broker & Market Maker, because of the Size they may trade.
Those trading via CFD, can do so in many ways, whatever their Platforms provide them.

After the 25th May 2009 Funding, we saw many large trades being reported, with many in the several millions. They caused the SP to be held until they had satisfied themselves.
The same is happening now, but this time it is different, with Political News coming anytime, and GKP News imminent.
Two million shares then, could be bought for £3m, and bought they where.

Has anyone since those days, seen those amounts of Shares being reported delayed, I have not, but I have seen plenty of smaller trades being reported, so perhaps someone is de-risking.

My guess is that some of the early High Net Worth Individuals have sold at the first high in 2009 around 120p, with more having sold at the two recent highs late 2010, and many are still holding.

We all are adverse to Risk, or should be, so we all have a Sell point calculated on Risk, or should have. Each to their own, as we assess as we go along, without need for anyone prompting us either way.

e) The regular Traders.
These folks mainly belong to the Banks and the like, and trade via CFD & DMA(Day Moving Average) trading actual shares.
They are not interested in the Fundamentals, but trade by percentage & charts, with the assistance of News searchers, Analysts and large amounts of money, that is not there own. They are the ones we all hate, earning big bucks for them selves, and millions for whom the work for, like Barclays, RBS etc
These are the Pro’s, and the first to Sell “into” each rise in tranches, until their sales are complete. They then Short each stock back down, gaining profit both ways, which once they finish, they repeat the process of buying again, by reversing the process, buying in tranches on the way down. Then it is all repeated on the next rise.
These folks have the ability to squash any rise they see fit to do so, even on seemingly good news. Unfortunately as well, they have no interest in a large spike up, as they have the accidental ability to subdue any rise, due to their Tranche Selling, while the PI buys. Both of which we all moan about.
They are called the City, and as such virtually control the SP

f) We the Minions.
An obsequious follower or dependent; a sycophant.
A subordinate official, especially a servile one.

We are trapped inside all the goings on in the Market Place, trying to figure out what’s happening, some from Level 2, some from News searching, with one common factor, Profit.
Some of us try to emulate the traders, sometimes successfully, many times not, as our limited knowledge of the Market, dictates what happens. I am no different in this respect, so I restrict my attempts now to large movements., so my T20’s are still intact, as is my holding.
Some trade it by SB’s leaving their holdings alone.
Each to how they manage the holdings.

Be in no doubt, Accumulation is happening all the time, and goes hand in hand with Distribution, more so right now from the bottom.

All is to the best of my knowledge, so in my humble opinion only.

PS, Sorry its so long winded.


10 Mar 2011

Top 5 Projects

Take a look at five of the largest oil projects in the Middle East, including one that could alleviate much of Bahrain's economic problems

With the world fretting over short-term oil supplies, and oil prices going through the roof, AlifArabia looks at the Middle East's largest oil project that could come on line within the next five years.

First, the interesting part: Zawya Projects Monitor data shows that much of the Middle East governments' efforts are focused on gas developments rather than oil developments.

Still, our short list of the Middle East's five major oil projects are formidable and can easily double the production levels of Libya's 1.7 million per day oil production - once they get on line.

RUMAILA 1,800,000 b/pd

The largest project in terms of production capacity is in Iraq where China National Petroleum Corporation, BP and Iraq's South Oil Company is redeveloping the Rumaila oil field to produce 1.8 million bpd of oil at a cost of $15-billion.
That field alone can replace Libya's supply and is part of Iraq's efforts to increases its overall production to 12 million by 2017.

However, the timeline seems ambitious.

The U.S. Department of Energy expects expects significant delays in current production plans because of limitations on Iraq's service sector; import difficulties, constraints on the number of operating rigs and skilled personnel available, apart from limitations on the export infrastructure, with current pipelines able to only support marginal increases in flows.

"There are also security threats from current and past conflicts, with pipelines still at risk of being attacked, field surfaces populated with unexploded ordinances, and land mines that must be cleared. Finally, there is legislative uncertainty, particularly related to the Kurdistan region.

The prospects for long-term growth, however, are bright."

MANIFA 900,000 b/pd
The second largest oil project in the region has been undertaken by Saudi Arabia's Aramco's Manifa oil field which should start producing 900,000 barrels per day as early as 2013, according to Zawya Projects Monitor.

The world's second largest producer of oil (behind Russia), Saudi Arabia is looking to build on its daily oil production capacity of 12.5 million, although it currently only produces around nine million barrels per day to comply with Opec quotas.

But the spare capacity makes the Kingdom the most important oil player in the world and that is a position it wants to hold on to.

However, the $11-billion Manifa has suffered delays, according to the EIA. The offshore field in Saudi Arabia's eastern coast consists of a 90-kilometre offshore pipeline, and offshore crude gathering facility, gas processing facilities and dredging of 27 drilling islands.

The Manifa field development is the last of Aramco's major oil projects as part of it concluded its $100 billion programme. The country has added over two million b/pd of capacity in 2009 with the addition of increments at Khurais, Abu Hadriya, Fadhili, Khursaniyah, Shaybah, and Nu'ayyim.
UPPER ZAKUM 250,000 b/pd
The United Arab Emirates is working on the third largest oil project in the region at a cost of $15-billion.
Abu Dhabi National Oil Company, ExxonMobil Corporation and Japan Oil Development Company are working on Upper Zakum Full Field Development to produce 250,000 barrels per day.

The world's eight largest producer of oil (2.7 million barrels per day) is one of the few Opec countries with spare capacity and it is looking to reinforce its position as an important oil producer.

"Company departments throughout Zadco are working at full stretch on the enormous expansion of drilling and production to achieve their goal to produce 750,000 barrels a day of crude by 2015," the company said in Adnoc's official magazine recently.

The project will be executed in three phases; the first phase consists of the offshore pipelines and early production facilities (EPF), the second phase consists of permanent production facilities and the third phase includes further facilities, according to Zawya Projects Monitor. "The development aims at increasing production capacity from 550,000 to 750,000 bpd by improving oil recovery at the field."

GHARAF 230,000 b/pd
Iraq is showing its oil prowess once again by appearing twice in the short list of major oil projects. The country's South Oil Company has teamed up with Malaysia's Petronas and Japan Petroleum Exploration Company to develop a 230,000 bpd oilfield. The $8-billion project is expected to be completed by 2016.

BAPCO 65,000 b/pd
The fifth largest oil project is interesting as it could help a Gulf country that is facing economic decline and political upheaval (Read Why Bahrain Matters).

Bahrain Petroleum Company's $15-billion investment to develop a 65,000 barrels per day oilfield can go a long way in alleviating the country's problems.

The United States Occidental Middle East Development, UAE's Mubadala and Bahrain's National Oil Company are building the project at a cost of $15-billion. It is expected to be completed in 2014 and can't come soon enough for a country that will need economic aid from its Gulf neighbours to weather its current political crisis.
Based on current oil prices, the new oil field can generate $2.3 billion a year for a country that's total GDP is $25.5-billion at the moment.

.SPECIAL REPORT- Risk, reward and Kurdistani oil
Thu Mar 10, 2011 10:30am GMT
The boom has attracted home exiles like Said Hemn Moustafa, 29, a civil servant who returned one and a half years ago after seven years in the United Kingdom."When I left, my country was not safe. Now all is good. No one has any problem. Everyone has job," says Moustafa, out for an afternoon stroll among the fountains of the newly landscaped Shar Park, at the foot of the ancient, mud-brick walled Citadel which marks the centre of Erbil.
Kurdistan's capital is packed with new high-rise buildings and shopping malls. The newly built ring roads and overpasses teem with recent-model Korean and Japanese compact cars and the occasional high-end off-roader. Hosts of foreign oil company offices give the sense of an emerging oil town. Ask people what's behind the new vehicles and buildings and the green lawns, rose beds, fountains and sculptures that occupy the roundabouts and traffic islands and the answer is always the same: "the 17 percent."

Signature bonuses have probably raised several hundred million dollars, according to executives in the region. But the real money comes from Kurdistan's share of Iraq's oil revenues, based on its population. This equates to 17 percent of the earnings from the 2.5 million barrels or so per day pumped from giant fields in the south of the country. Can Kurdistan -- and Iraq - boost these export earnings?


In the compound ringed by blast walls that houses the Kurdish parliament and other government buildings, the Kurdish regional government's natural resources minister Ashti Hawrami sits in his office, dimmed by heavy drapes. The four-year-old building is clad in brick and boasts a grand entrance hall with an inlaid marble floor and curved staircase. That gives way to more modest decorations inside: inexpensive photographs of oil installations, mass-produced prints of flowers, faux-leather sofas.

Hawrami says there is "big excitement" in the oil industry. He expects the existing contracts agreed by the Kurdistani government will soon be recognised by Baghdad. But push him and even he cannot point to a fundamental change in Baghad's position on the contracts. Put simply, Kurdistan says its contracts are in line with the constitution, while officials in Baghdad insist on central control over oil contracts. "In principle, it has been agreed that everything will be done according to the constitution, and we are not asking for anything outside the constitution, so therefore basically we have an agreement," Hawrami said in November.

Not quite. If Baghdad forces the Kurdistani government to redraft the contracts, explorers' returns could be hit hard. Kurdistan's deals with foreign oil companies are production sharing contracts (PSCs). But Baghdad wants the contracts to be rewritten along the lines of the service deals it has signed with BP and Exxon in the south. PSCs usually offer better returns and more control than service contracts.

Analysts at Deutsche Bank calculate the internal rate of return allowed under DNO's contract will be 50 percent. In comparison, Baghdad's $2/barrel service contracts with Royal Dutch Shell yield only 17 percent.

Iraqi Oil Minister Abdul Kareem Luaibi has said the 2011 federal budget will include the expectation of shipments of 150,000 barrels per day from Kurdistan -- more than the Kurds say they can produce.

So even though exports resumed a few weeks ago, with no clarity on the revenue model companies like DNO are yet to be paid. That's not a problem for diversified investors like Marathon Oil and OMV who can afford to sit and wait. But smaller Kurdistan-focused companies will struggle. Continued...

Gulf Keystone, for instance, says it has enough cash to last until the second quarter of 2012. By then, it hopes to have a steady cash flow from exports, which will open up the option of debt financing. But if that doesn't happen, it will face a crunch. Analysts at Bernstein calculated that a two-year delay in an oil project's start up could halve its economic value. There have already been casualties.

U.S.-based Calibre Energy's plans for a $100 million flotation failed to materialise, ending its hopes of being a major force in the region. Sterling Energy's shares soared to over 220 pence in late 2009, when it raised $103 million to start drilling, only to fall to under 50 pence a year later, as it encountered drilling problems. The shares now trade around 66 pence.

News of a final deal on exports will please people like Norway-based private investor Eirik Amundsen, who holds 79,000 shares in DNO. "It's been some very tough years, but I have always firmly believed that common sense sooner or later will prevail, and thus give DNO the opportunity to fully develop the potential of its Iraqi assets," he says. "I have to admit, though, it has taken much longer than I anticipated." And while optimism is high, there's no guarantee the wait is over yet.

(Additional reporting by Andrew Quinn in Washington, Rania El Gamal in Baghdad and Shamal Aqrawi in Erbil; Editing by Sara Ledwith and Simon Robinson)


Iraq Crude Oil Exports to Turkey to Resume Within 24 Hours
By Kadhim Ajrash and Nayla Razzouk - Mar 13, 2011 9:49 AM GMT

Iraq will resume crude oil exports to Turkey within 24 hours after shipments were stopped by a bomb attack four days ago, according to Emad al-Baqer, North Oil Co.’s head of production.

Workers are replacing parts of the pipeline to allow exports from Iraq’s northern Kirkuk oilfields to Turkey’s Mediterranean port of Ceyhan to resume, he said. "Repair works will not take more than 24 hours and exports will start after that," he said in a telephone interview from Kirkuk today.

The sabotage on the 600-mile (965-kilometer) pipeline knocked out as much as a quarter of the country’s crude exports, or about 590,000 barrels a day. The disruption came at a time when oil supplies into Mediterranean Sea ports were reduced by the unrest in Libya. The International Energy Agency estimated Libyan exports have dropped by at least 1 million barrels a day since the unrest there began.

Iraq’s oil exports last month rose 2 percent to 2.2 million barrels a day, the highest since the U.S.-led invasion in 2003, after shipments from the northern Kurdish region resumed Feb. 3 following a halt of more than a year due to a dispute between the central government and the semi-autonomous region.

Daily shipments in February included 484,000 barrels a day from Kirkuk, Falah al-Amri, head of the country’s State Oil Marketing Organization, said in a March 1 interview. Iraq pumped 2.6 million barrels a day in February, according to Bloomberg estimates.

Iraq’s biggest refinery restarted operations this month after a sabotage on Feb. 26 in which four engineers were killed in the first assault on the 250,000 barrel-a-day refinery in the northern city of Baiji since the 2003 invasion.

To contact the reporter on this story: Nayla Razzouk in Amman at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Maher Chmaytelli at mchmaytelli@bloomberg.net


Gulf Keystone Petroleum (LSE: AIM GKP 121p Mkt Cap £922m) CONCLUSION: BUY
Note – Investing in companies on AIM is best suited to experienced investors. The risks have been highlighted on the last page of this document.
“Encouraging progress to production at Shaikan-1 and Shaikan-3, it is entirely possible that 2011 will see rising reserve estimates at Gulf Keystone’s Iraqi properties”.
COMMENT: To recap, Gulf Keystone Petroleum (LSE:AIM GKP) is a Bermuda incorporated holding company (enjoying income and capital gains tax free status until 2016) with petroleum interests in Algeria (pending sale) and the Kurdistan region of Iraq. The Kurdistan Regional Government (KRG) oversees a large undefined area of Northern Iraq and operates with some degree of autonomy from the Iraqi Federal Government in Baghdad.
Five years ago, the Kurdish zone was a “wildcat” area far away from Iraq’s major oilfields in the south, near Kuwait and in the middle outside the “Sunni triangle” (Tikrit /Baghdad/ Al Ramadi). Whilst promising in terms of location, the Kurdish area is legally uncertain. Production sharing agreements (PSA) with the KRG have not been ratified at Federal level. The laws governing oil E&P in Iraq have yet to be constitutionally settled, hence there is the potential for KRG PSA/ deals to be subject to ratification or possibly cancellation. Some of the KRG’s PSAs with foreign oil companies are disputed by the Iraqi Federal government.
In Gulf Keystone’s PSA the KRG take 40% of the profit from the oil well after Gulf Keystone has recouped costs. The KRG has back-in rights that would dilute Gulf’s working interest in Shaikan to 51% and Akri Bijeel to 12.8% if exercised in full. There are controls on the sale of KRG oil, the stipulation is that it must be refined and sold at local not international prices into the local market. The KRG is also a partner holding 20% working interests in the Sheikh Adi and Ber Bahr licences. It is in Gulf Keystone’s interests that the KRG is preserved as a legal entity and hence its PSA is legally enforceable. Broadly speaking whilst the PSA’s current terms diminish the realised oil price per barrel the compensation is the potential for very rapid oil reserve accumulation.
The lure for Gulf and other foreign oil explorers is Iraq’s oil reserves, the fourth largest in the world at over 143bn barrels (not including the KRG area) according to the Iraqi Oil Ministry. The constraint is Iraq’s oil infrastructure was damaged in the two Gulf wars and is now being rebuilt limiting capacity. Since oil companies moved into the Kurdish area, there have been significant oil finds by Heritage Oil (Mirzan West) and Gulf Keystone (Shaikan-1 / 3).
Since AIM flotation in 2004 Gulf Keystone has secured licence interests over 1,631km² in the Kurdish zone. This is a leading size position in a highly prospective area and likely to attract oil majors looking at securing exposure to the Kurdish area in one step. It is possible to make the claim that access to Iraqi oilfields presents an opportunity similar to the opening of other Gulf states, Saudi Arabia, UAE and Kuwait in the 1950s/1960s.
Gulf had a cracking start to 2011 with its announcement that the shallow well Shaikan-3 could contain between 220m barrels (P50 “probable” basis) to 2.2bn barrels (P10 “possible” basis). Over 2011 we expect the team will improve their understanding of the Shaikan-3 well’s structural integrity and depth – a process that often involves upgrades to oil reserve estimates. This could happen as more analysis of the Cretacous/ Jurassic down dip takes place over summer. Shaikan-3 could cause capacity issues in that Gulf only has storage for 20,000 barrels. In terms of short-term production, Shaikan-3’s has finished the appraisal phase with a flow rate of 9,800 barrels – approximately 30% above the initial appraisal stage estimates. We expect reserve estimates to firm up over the course of 2011 providing potentially four areas of possible oil reserve uplift for the group (Shaikan-1 and 3, Bijeel-1 and Sheikh Adi).
Gulf’s existing portfolio contains the following licences:-
*Shaikan-1 (1.9bn (P50) – 7.4bn (P10) barrels; tested at a flow rate of 31,000 bbls per day in total from two different depths. The reserve estimate was made by independent surveyors Dynamic Global Advisors. This property extends over 283km².
*Shaikan-2 rig spudded in December 2010, currently being evaluated.
*Shaikan-3 (220m (P50) – 2.2bn (P10) barrels –a shallow well; a rig will spud in Q2 2011.
and Bijeel-1 (discovered on 9th March 2010).
Shaikan-4 is an exploration well that is awaiting a 2,000 hp rig currently en route from Tunisia which should spud in late March. The team are optimistic that with the Shaikan field “de-risked”, given the finds to date that new exploration will improve understanding of the technical requirements of the field at different depths.
Shaikan-5 / 6 & 7 are other drill targets that are planned for May to November 2011.
*Sheikh Adi: Gulf also operates this property with an 80% working interest and KRG holding the balance. This 251km² area of which approx 100km² already has available seismic data is estimated to hold over 1bn barrels is subject to licence conditions stipulating a US$14m exploration spend.
*Behr Barr: Gulf Keystone holds a 40% working interest alongside Genel 40% and KRG 20% with Genel the operator. Reserve estimates range to 1.9bn barrels of oil in place (according to Genel management estimates) over a 208km² area. This property is in early stage exploration with further exploration expected over 2011.
*Akri Bijeel; Gulf holds 20% working interest with MOL holding 80%. Bijeel 1 hit oil on the 9th March 2010. The exploration phase 1 ended in November 2010 and further exploration is optional. This property which extends over 889 km² benefits from 2D seismic data over 200km²
Gulf finished support facilities, a 20,000 barrel tank and are planning to start production at a rate of just 8,000 barrels per day. In the short-term oil could flow via the EWT pipeline to a local refiner after negotiation of a sales contract. Whilst confident further exploration and capital expenditure will be required, the board started 2011 with cash reserves of over US$215m for both the 2011/12 work programme and capital investment requirements.
On an enterprise value basis Gulf Keystone approximates £787m/ US$1.26bn against licence interests with estimated fully diluted oil reserves of 3.98bn barrels or 31 cents per barrel. This seems surprisingly low, notwithstanding the PSA and capacity constraint issues.
Gulf Keystone licence
Mean oil reserve estimate (bn)
Fully diluted working interest (%)
Attributable to Gulf
Sheikh Adi
Ber Bahr
Akri Bijeel
In our view Gulf Keystone has an exciting licence portfolio with properties likely to move into production over the next 36 months and with the prospect of upgrades to oil reserve estimates as P50 to P10 bands narrow. The recent slide in the share price since December 2010 (approx 75p ps) is difficult to explain by reference to any recent corporate development


Settlement as of 15/03/2011, at 5:45 p.m.

Gulf Keystone Petroleum Com closes deep in the red, exhibiting a percentage loss of -4.09% at end of trade. In a weak start to the day, we saw an opening price of 126, above the previous session's low, followed by a persistent downslide throughout the day. The weekly analysis of the security and the FTSE AIM 100 Ix shows Gulf Keystone Petroleum Com losing relative strength against the index.
Status and Trend Analysis

Gulf Keystone Petroleum Com's technical status shows signs of decline with support listed at 117.7, while on the upside resistance can be identified at 132.2. In the next session we could witness a new downswing with a likely target of 112.1 (red line in the chart).
Risk Analysis

Here is an investment for risk-loving investors, who will choose to venture large sums despite the security's high daily volatility of 3.92. With daily volume equalling 7,666,001, above the moving average of 6,489,614, Gulf Keystone Petroleum Com is clearly attracting interest in the market.

http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/exchange-insight/technical-analysis.html?fourWayKey=BMG4209G1087BMGBXAMSM --------------------------------------------------------------------------------

Excellent post IV48, I hope you don't mind my reposting it, in case anyone missed it.

For me it summed up my view of GKP excellently right down to the probable reasons for the lack of news. It also struck a chord with your reference to the proxy approach to investing in oil businesses - that is the reason I spend too much time on this BB and researching; it is a business in itself; a calculated risk, not a gamble.

Lastly, anyone who "knew" that getting off at 1.90 to get back on now was a good bet is kidding him/herself, it could/should have gone to the executive floor any second; far too risky to call IMHO.

Good luck all long and strong here, and thanks again for a great post IV48

Hi GKpians,

Good opportunities do not come along on a daily basis and i have made a concerted decision that investing in GKP,is a proxy for me to participate in an oil business that has tremendous potential and already made a major discovery in Shaikan.

When one has the capital,sometimes age could be against us,to start a business from scratch and to worry about daily operations and more important the right connections!

Hence,it did not surprised me to see Soros investing in Longford Energy and Western Zagros,Paulson investing in Western Zagros as these billionaires have the finacial resources but do not have the daily expertise to run these companies,and partnering with the principals of the above companies would be an ideal fit.When one invests in a business,the daily fluctuation of the SP does not necessarily reflect the fundamentals or the performance of the company,but over a longer period the SP will be the indicator.

The Soros and Paulson,investing in a listed oil business gives them an exit strategy if the business eventually do not perform up to their expectations.But these investors will not be investing based on the daily fluctuation of the SP,but on the fundamentals and political risks as they perceive it and in this case,Kurdistan is definitely acceptable to them.

I can rest assure many that these billionaires may be super rich,but they treat every investment with caution and all billionaires have a common trait,dispite being so rich,they all hate to lose!!

The recent move of GKP from 167p up to 200p on Mailki's comments and then all the way down to 121p as of last friday,since Mailki's about turn,coupled with the Libyan and Middle East demonstration,tells me how volatile GKP has been and the amount of traders both longs and shorts taking position on GKP on a daily basis to make the 100pounds,300pounds,1kpounds,etc etc as a means of a livelihood!

We also cannot discount the fact that 1-2institutions that bought below 3percent are trimming their positions,PI's exiting,that the SP was sold down,using the Libyan unrests as an excuse to accumulate more shares from a low rebound!

Whichever could be the real reasons,many of us are just guessing and we will never know the real reasons behind this sharp fall over 3-4weeks!

But a few things are certain:

1.That from no exports in Kurdistan in Jan 2011,Kurdistan is now exporting at least 100k barrels per day,and plans are now being looked at to increase this to 200k barrels per day by year end.If i remembered clearly,the KRG took a very firm position that if their demands are not met,there will be no exports and the fact that they are looking to increase this,is a clear testimony that there are agreements made with Baghdad and not made public and hence the uncertainty continues for many but not me!!

2.That no oil companies have stopped operations in Kurdistan and as per Hawrami's latest comments,that there are 42oil companies exploring for oil in Kurdistan and they have spend billions and contributed to the Kurdish economy.Thats so much for being fearful investing in an oil business in Kurdistan!

3.That by April we could see 3exploration wells with GKP,Bekyme-1,Ber Bahr-1 and the existing SA-1,2 appraisal wells in SH-2 and SH-4!That by itself speaks clearly that management have lived up to their performance,though the findings of SA-1 and SH-2 are still been kept very closely by the management and any significant finds,the KRG have to review it first before GKP can make it public!

4.That our valuation by all the brokers that cover GKP,GS,Mirabaud,FD,DS and Evolution have target prices from 150p to 234p based on an OIP of 4billion barrels in Shaikan confirmed by Ryder Scott.

5.That the directors stock option for 2010 performance at 175p,only exercisable if GKP's SP reaches 275p,325p and 375p tells me that management are confident of more OIP and an upgrade.

Thus,if i am taking my investment in GKP as a proxy to an oil business and in partnership with TK and his senior management,the daily movement of the SP will give me a feel good factor when it is up on that day and a don't feel good factor when it is down on those days!!Unless i am trading on the shares,the SP in the short term only makes me feel rich thats all if it is up!!

What's most important to me,that this business must have lots of oil and a low cost of production,a management team that delivers and meets their KPI's.Politically the tests for me is,as long as Kurdish exports continues and been ramped up,thats good enough for me, rather than reading press reports that likes sensationalism that reports otherwise.

I could have sold at 190p and bought back at these levels,but i do not time my investments and i am not a trader and i take this as a business and will go for the long haul,and when TK exits,i will too!!

I enjoy posting and want many whom share and see the fundamentals of GKP make monies together,and thats what investing is all about and made possible with this platform that we call interactive investor!!

I wanted to avoid posting until the next material RNS,but i thought i wanted to share my thoughts with the many fellow PI's out there.Sorry for the rant!

Goodluck and best wishes to all Gkpians.


Massive protest held in Iraqi KurdistanSun Mar 20, 2011 5:7PM
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A February protest in SulaymaniehAn unprecedented number of protesters have gathered in the Iraqi Kurdistan to protest the regional government's corruption and failure to implement democracy.

The Sunday rallies took place in the city of Sulaymanieh and were attended by a large crowd, who gathered to attend the Nowruz celebrations, which marks the change of the year, Reuters reported.

"We are gathering in thousands today to celebrate the festival of Nowruz and to stress that we still ask for our demands of reforms to be answered," said Nasik Qadir, spokeswoman for protesters in the city.

"We are here to say that our demands have still not been met."

The rallies, inspired by the recent revolutions in Tunisia and Egypt, have been raging on since last month, urging the removal of the Kurdistan Regional Government (KRG).

The government has reportedly deployed a 4,000-strong contingent to Kurdistan's city of Kirkuk to prevent protests.

The troops belong to the Peshmerga division, which operates in the northern region as an offshoot of the Iraqi Army's Regional Guards.

The outraged public were about to raise their voices about a lack of basic services and Kurdish hegemony over the city and the province.

The KRG, however, claimed it had received credible intelligence about planned attacks against the Kurdish community.



20-03-2011 3 Reads�
Nine Kurdistan parties sign peace deal

KURDIU (Suleimani): Some nine political parties in the Kurdistan Region signed a deal in Suleimani, as a stride to ease the tensions in the city, overwhelmed by anti-government public rallies.

Peace Campaign which was formed after the recent protests set the stage for the peace package. In a press conference Saturday the peace campaign organizers announced the terms of the deal:

1.No political party is allowed to resort to violence of any sort.

2.No political party is allowed to use force against the other for the internal conflicts.

3.No political party is allowed to mobilize the public to exercise violence against another party by burning its headquarters, assassinating its members or any other sort of violence.

4.The parties are committed to the territorial unity of the Kurdistan Region (northern Iraq) and oppose the multi-administration system in the Region.

5.No party is allowed to resort to a foreigner force or engage with an outsider party against Kurdistan public in general or a political party in particular.

6.All the signatories should commit to and respect the terms stipulated in this pact. The violators are accountable before God, the nation and the country.

7.All signatories protest terror and violence and condemn all sorts of murder and destruction.

The signatories included the Patriotic Union of Kurdistan (PUK), the Kurdistan Democratic Party (KDP), the Kurdistan Islamic Union (KIU), the Kurdistan Islamic Group (KIG), the Kurdistan Social Democrat Party (KSDP), the Goran (Change) Movement, Kurdistan Independent Toilers Party (KITP), Kurdistan Communist Party (KCP), and Kurdistan Islamic Movement (KIM).

the june deadline refers to the release of iraq from chapter 7 of the UN. massive for iraq and unlikely without oil and gas law.
currently huge restrictions on iraqs finance ministry and the govt in general from the UN.
all oil income is deposited at the federal reserve bank of new york, before repatriation to iraq !
Iraq has to demonstrate how it will repay its debts to give itself financial independance.


I repeat: there is only one 'player' who is hindering the contract ratification in its present form: Al-Shahristani.

One way for Al-Shahristani to receive a boot up the proverbial is for pressure to be brought on him from foreign investors in Iraq from all industry sectors who should show their concern that to not honour the Kurdistan PSCs is to cast a shadow over any foreign investment in the whole of Iraq.

Of course, the Russians and Chinese would love the Western investors to make a noise about this so that they could fill any vacuum in the event of protests and withdrawals, but I sincerely believe the Iraqis prefer to trade with compliant Western companies which also employ locals, unlike (for instance) a Chinese company which prefers to employ Chinese.

We could write en masse, or write to our MPs , or write individually and directly to the Iraqi government , or write to Al-Shahristani's London address directly (I have been looking for this on the internet but so far to no avail ) . There is no point coordinating a petition - each to his own, but I have been communicating with several Iraqi journalists in the last few weeks to complain and ask their opinion. They have taken on board my points but are non-commital. No surprises there.

GKP may not like us doing this as it ruffles feathers in the Iraqi government but what else can we do? There is no feedback from the GKP board on contracts other than to say 'the contracts are legal in terms of the Iraqi constitution' .



Iraq call for Shell deal review
The Iraqi Cabinet's energy committee has asked the country’s Oil Ministry to review the economics of a $12 billion natural gas joint venture with Shell and Mitsubishi , the oil minister said.

News wires 22 March 2011 15:40 GMT

The ministry plans to report its findings next week.

"Next week we will have a meeting to present a clearer vision of the economics of the contract," Oil Minister Abdul-Kareem Luaibi told a news conference today.

The deal with Shell and Mitsubishi is intended to allow Iraq to use some of the 700 million cubic feet of natural gas it flares each day to fuel urgently needed domestic electricity generation, Reuters reported.
Shell chief executive Peter Voser said last week the oil company hoped the deal would be approved soon, while acknowledging that progress had been "slower than we anticipated".

Iraq is in the early stages of opening up its oil and gas industry to international companies in the hopes of rapidly expanding production, now barely above levels achieved under international sanctions before the overthrow of dictator Saddam Hussein in 2003.


March 23, 2011

Gulf Keystone Finds Lighter Oil In Upper Jurassic Sections Of Shaikan-2

Shares in Gulf Keystone Petroleum have surged this month as anticipation mounted ahead of results from a key appraisal well on the giant Shaikan discovery in Kurdistan. Last week that anticipation grew to fevered excitement when the AIM-quoted explorer, which has seen its market cap swell to £1.3 billion on the back of its drilling successes in northern Iraq, said flaring at the Shaikan-2 well site could be seen in the company’s Erbil offices, some 85 km away.

Now details of the initial flow test are in, with the deep appraisal well flowing 10,144 bpd and stabilizing at just over 8,000 bpd of 26-degree API oil and 2.44 million cubic feet per day of gas. The crude is significantly lighter than that encountered at Shaikan-1 and Shaikan-3, both of which are currently producing 18-degree API oil from the upper sections of the Jurassic under an extended well test. It is thought Shaikan-2 could sustain output in excess of 10,000 bpd.

Importantly, the well is a 9 km step-out from the Shaikan-1 discovery well, which has important implications for oil-in-place resource estimates. Analysts at Ambrian Oil & Gas welcomed the result as a “positive initial result”. “Some 10,000 bpd from the upper Jurassic section confirms reservoir connectivity and that the hydrocarbons encountered in this part of the Shaikan structure (9km away from Shaikan-1) are all part of the same — very large — accumulation,” the analysts said.

And there’s more to come: the Shaikan-2 well test was conducted in a 44 metre interval in the upper section of the Jurassic; following testing, the well will now continue to drill deeper where, if it follows the Shaikan-1 geological sequence, it should encounter multiple potential Jurassic and Triassic reservoirs before reaching TD at the bottom of the Triassic or the top of the Permian.

The hope is this well will reveal more about the resource potential of this giant structure, and about how much could realistically be recovered: the lighter oil encountered in the upper Jurassic at Shaikan-2 points to higher recovery factors, which can only be positive. At present, the reserves estimate for Shaikan-1 ranges from a P10 of 1.9 billion barrels to a P90 of 7.4 billion barrels, with a mean number of 4.2 billion barrels.

Shaikan-1 was drilled to a depth of 2,950 metres, well short of the planned 5,000 metre TD, because of a massive kick in the Triassic. It took the company three days to bring the well back under control. Five zones were tested from Shaikan-1, flowing at cumulative rates of 20,000 barrels of oil equivalent per day, with API numbers ranging from 18 degrees at the top to 55 degrees at the bottom. Investors are very keen to learn more about the deeper levels and will be watching the progress of Shaikan-2 with interest. The company’s consultants, Dynamic Global Advisers of Houston, reckon there could be an additional 1 to 5 billion barrels in the Triassic. A second deep appraisal well, Shaikan-4, some 6 km west of Shaikan-1, is expected to spud by the end of March. It is targeted to drill the Jurassic and Triassic age formations and possibly the top of the Permian.

Gulf Keystone has a 75 per cent working interest in the Shaikan block (or 51 per cent on a fully diluted basis), alongside Hungarian energy group MOL with 20 per cent and Texas Keystone with five per cent.


Fields of dreams

The big difference in Iraq is that one of the key customary risks – exploration risk – can often be almost eliminated due to the unusual degree of confidence that hydrocarbons are present. In the south of Iraq this is frequently because most of the oilfields that have been the subject of the latest three licensing rounds are known to have existed and have been in full-scale production at some point over the past 30 years.

The existence of these huge fields has, of course, been the justification for the technical services arrangement embodied in the Iraqi DPSC, on the basis that there was never any exploration risk for a bidder. All that was required was a large balance sheet and the technical expertise and resources a major international oil company could provide to bring a particular field back on stream.

In contrast to southern Iraq, the virtual elimination of exploration risk in Kurdistan arises in other ways. This was well-illustrated to me many years ago by the look on the face of one leading hydrocarbons geologist who, during the early scramble for Kurdish exploration acreage, memorably emerged open-mouthed and ashen-faced from a London data room whispering that he had seen “mountains full of oil”.

This turned out to be pretty accurate, given that the success rate for exploration wells in Kurdistan currently stands at around 80 per cent.
As regards the thorny issue of relations with the KRG, there is now evidence that North Oil Company, the vehicle used by the KRG for oil investments in Kurdistan, is being offered participations in some key oil projects in southern Iraq – thereby further breaking down the barriers between Kurdistan and the south and almost introducing an element of ‘cross-shareholding’. Al-Luaibi also announced recently that “talks with the brothers in the KRG will continue in order to reach solutions which meet the public interests”.
Inevitably there will be a number of external factors that will incentivise the Iraqis and the broader oil industry to tackle and overcome the obstacles to Iraqi investment ... market forces can be expected to encourage national and international oil companies and other oil industry participants to come to the table in Iraq.

It could be that the Iraqis have found a magical mix of political will, industry expertise, personalities and global circumstances that can help to reduce or overcome some of the risk factors that have affected them in the past and herald a new golden age of investment in Iraq. If that proves to be true, one can expect the original wave of first movers into Iraq to sit back and enjoy the parallel benefits of a rising oil price and falling Iraqi risk.



UPDATE 1-Murphy adding block in Iraq's Kurdistan

Tue Mar 29, 2011 2:21pm GMT Print | Single Page [-] Text [+]
NEW ORLEANS, March 29 (Reuters) - Murphy Oil Corp (MUR.N: Quote), a U.S. oil and gas company in the process of shedding its refining assets, said on Tuesday it is adding to its position in Iraq's Kurdistan, where it recently began operations.

"We have a second block that we are about to sign," David Wood, the company's chief executive officer, told the Howard Weil Energy Conference.

In November, Murphy finalized an agreement with the Kurdistan Regional Government-Iraq for 50 percent of the Central Dohuk block, an area covering 619 square kilometers (240 sq miles).

In July, Murphy announced plans to sell its three refineries to focus on oil and gas exploration and its retail business. Wood told investors that the company has seen "a fair amount of interest" in the plants and a deal may come in the second quarter.

Shares of the El Dorado, Arkansas company were down 13 cents, or less than 1 percent, at $71.74 in morning New York Stock Exchange trading. (Reporting by Anna Driver, editing by Gerald E. McCormick)


UPDATE 1-Norway's DNO boosts oil reserve estimate in IraqWed Mar 30, 2011 10:12am GMT Print | Single Page [-] Text [+]
* Recoverable oil seen at 306 mln barrels, up from 230 mln

* Revision a "major step up" with more to come -analyst

* Iraqi political dispute still blocking DNO revenue

* DNO shares up 1 pct on news, outperforming Oslo bourse

By Walter Gibbs and Henrik Stoelen

OSLO, March 30 - (Reuters) - Norway's DNO (DNO.OL: Quote) said on Wednesday it controls 30 percent more oil in Iraq and Yemen than previously estimated.

DNO's biggest revision was in how much oil it expects to squeeze from its Tawke field in Iraqi Kurdistan -- 306 million barrels, up from 230 million. It had no news on an Iraqi political dispute blocking payment for exports from the field.

Trond Omdal, analyst at Arctic Securities, called the new Tawke estimate "a major step up" and said there could be more to come.

"There could potentially be (additional) upside in both the oil in place and the recovery rate," he said, estimating DNO will ultimately get at least 400 million barrels from Tawke.

DNO based its Tawke revision on an increase in the portion of oil in place it thinks it can recover. It now sees 21.3 percent as recoverable, compared with the 16.6 percent assumed in 2007.

Many similar fields in the region have recovery factors in excess of 30 percent, according to Omdal, who has a buy rating on DNO.

Analyst Teodor Sveen Nilsen at First Securities said DNO's report was positive for the stock.

"It is what we've been waiting for, as one of several triggers in the first and second quarters," he said. "It's the first significant upgrade of Tawke reserves since 2007."

DNO spokesman Tom Bratlie said the company had nothing to report on contentious talks between Baghdad and the Kurdish regional government over how to structure payments to DNO and other oil producers in Kurdistan.

Shares of DNO were trading up 1.0 percent at 9.05 Norwegian crowns at 0937 GMT, outperforming a benchmark Oslo index that was up 0.41 percent. (Editing by Louise Heavens)

© Thomson Reuters 2011 All rights reserved

Draft Oil Law 2007

Article 8: Field Development and Oil and Gas Exploration
A- Regarding the priorities aimed at restoring and increasing Production related to existing Fields, INOC is the Operator and is authorized to directly sign services contracts or administrative contracts with appropriate oil or services companies, in case this was needed to accelerate reaching to the goals stated in this Article.
B- The Ministry, and after coordinating with Regions and Producing Governorates, and in adherence to Article 9 of this Law, is to propose to the Federal Oil and Gas Council the best methods to develop the discovered but yet not developed Fields.
C- The Ministry prepares model Exploration and Production contracts to be approved by the Federal Oil and Gas Council and to be appended to this law. These model contracts must guarantee the best levels of coordination between the Oil Ministry, INOC, and the Regions each according to their specific responsibility in relation to both this Law and the international oil companies.

DRAFT OIL AND GAS LAW PREPARED BY THE COMMITTEE ON 15 FEBRUARY 200715D- Utmost effort must be put into ensuring speedy and efficient Development of the Fields discovered but partially or entirely not yet developed when this law is enacted, and it is permissible to develop these Fields in collaboration with reputable oil companies that have the efficient financial, administrative,technical, operational capabilities according to the contracting terms and the regulations issued by the Federal Oil and Gas Council.

E- The Federal Oil and Gas Council, the Oil Ministry, INOC, and the Regional Authorities have to carry out an exploratory program in Iraq to assess the Oil and Gas resources and to compensate Production, and to add new reserves.
F- The Ministry must provide the Federal Oil and Gas Council with a comprehensive
proposal for Oil and Gas Exploration throughout the Republic of Iraq in coordination with the Regions and the Producing Governorates, sorting out the areas according to their Oil and Gas potential, implemented within a short time table in order to guarantee increasing reserves and continuing Production and Development.

Article 9: Grant of Rights

A- The rights for conducting Petroleum Operations shall be granted on the basis of an
Exploration and Production contract. The contract shall be entered between the Ministry (or the Regional Authority) and an Iraqi or Foreign Person, natural or legal, which has demonstrated to the Ministry or the Regional Authority the technical competence and financial capability that are adequate for the efficient conduct of Petroleum Operations according to the guidelines of the Federal Oil and Gas Council and as mentioned in Article 5C Fifth, and in accordance with the mechanisms of negotiations and contracting stated in Article 10 of this Law.

B- The licensing process shall be based on transparent and accountable tendering and shall take into account recognised practices by the international petroleum industry. It shall adhere to the following principles and procedures:

First: Competitive licensing rounds based on clearly defined terms and terms of application as well as the criteria to be used in the selection of successful candidates.
Second: The contractual terms offered to applicants shall be specified in model contracts accompanying the letter of invitation.
Third: The form and terms of the model contract shall take account of the specific
characteristics and requirements of the individual area, Field or prospect being offered, including whether the resources are discovered or not, the risks and potential rewards associated with the investments under consideration, and the technological and operational challenges presented.
Fourth: All model contracts shall be formulated to honour the following objectives and criteria:
1- National control;
2- Ownership of the resources;
3- Optimum economic return to the country;
4- An appropriate return on investment to the investor; and
5- Reasonable incentives to the investor for ensuring solutions which are optimal to the country in the long-term related to
a- improved and enhanced recovery,
b- technology transfer,
c- training and development of Iraqi personnel,
d- optimal utilisation of the infrastructure, and
e- environmentally friendly solutions and plans.

Fifth: The Model Contracts may be based upon Service Contract, Field Development and
Production Contract, or Risk Exploration Contract provided they are adapted to best meet the objectives and criteria under Article 9B above which serve the best interest of the Republic of Iraq.

Sixth: Only pre-qualified companies by the Ministry or the Regional Authority shall be considered in any licensing round. The criteria for prequalification shall be specified in the invitation to bidding according to the regulation and instructions issued by the Federal Oil and Gas Council.

Seventh: Evaluation of pre-qualified applicants shall aim at establishing a short list of successful candidates for negotiations.

Eighth: The selection and ranking of successful applicants shall be on the basis of the quality and relevance of the proposed work plan and the anticipated economic return to Iraq.

Ninth: The overall allocation of Exploration and Production rights throughout the Republic of Iraq shall aim at achieving variety among oil companies and Operators with different background, expertise, experience and approach so as to enhance efficiency through positive competition, benchmarking of performance and transparency. The possibility of using consortia of selected companies, particularly in large Fields, should be considered.

Tenth: Not later than two (2) months after the endorsement of approval of Exploration and Production contracts, the contract must be published.

C- The granting of rights for the activities referred to in Article 9A shall always respect national interests, for example those related to defense, navigation, research and development, conservation, health and safety and a high level of environmental protection.
D- The Designated Authority is to regulate the form and manner in which rights are granted under this Article in a manner consistent with this law and the regulations of the Federal Oil and Gas Council.


The honouring of payment is conformation of our PSC agreements.

It is up to the ICG and the KRG to sort out their own agreements.

What about the oil law obstacle? Or does that not exist? Can Shell really sign a 12 billion dollar deal without a cast iron agreement?" Would DNO be pumping oil for exports without gaurenteed payments? Would 47 other E and P companies sign agreements in Kurdistan?

The impression is that each deal is being loooked at on its merits. There has to be a national oil law to distribute revenue in Iraq and Kurdistan. However it does imply that individual deals are made according to risk and other criteria. My point is that the oil law may have no effect on GKP as the status quo is the simplest solution. In fact we do not need an oil law as we have an agreement. The honouring of payment is conformation of our PSC agreements.

Once we see payments to DNO et al that is when we will see blue sky for our investment.

Mr. Reliable


Baghdad and Erbil to discuss free trade-zone with Turkey
Saturday, April 2nd 2011 10:29 AM

Erbil, April 2 (AKnews)- The economic adviser at the Kurdistan Region’s Ministry of Commerce and Industry said an Iraqi delegation will arrive in Erbil soon to discuss procedures for opening an international trade zone with Turkey.

Fathi Mohammed Ali told AKnews the delegation will arrive in Erbil (Kurdistan capital) April 10th. The delegation and the Ministry’s officials will expand on setting up the new zone to reach a final agreement. Then, tripartite meetings will be held with Ankara over the same topic.

This seems to be the first official meeting with Kurdish side after the announcement of the plan.

The Kurdistan Region’s Premier Barham Salih had told Reuters in June that Iraq is seeking to open two new border crossings with Turkey and to set up a free trade zone in Iraq's northern city of Zakho, 440 km north of Baghdad.

The Ibrahim Khalil border gate is the only official passage connecting the Kurdistan Region, northern Iraq, to Turkey. Hundreds of trailers and visitors cross the passage on a daily basis. The new passages are to ease the heavy traffic on the single point and to boost economic relations.

Turkey is a key investor in Iraq with its trade exchange with the country growing considerably. In 2010 the exchange volume reached 7.5 billion U.S. dollars. Turkish companies comprise over 60% of foreign investment in Kurdistan.

Reported by Hevidar Ahmed



last 4 /5 paragraphs on nabbuco, and ashti hawrami talks with turkish minister of natural resources.

Warming Relations Between Turkey and Iraqi Kurdistan02/04/2011 05:37:00 By MOHAMMED A. SALIH
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Turkish PM Recep Tayyip Erdogan in Erbil. Photo by Namo Adulla for Rudaw

ERBIL, Iraqi Kurdistan -- It was the most glamorous reception that the government of Iraqi Kurdistan had ever given a visiting foreign leader. The main streets of the capital Erbil were adorned with flags, Turkish ones visibly outnumbering those of Kurdistan or Iraq.

Kurdish leaders stood to the side of the red carpet at the newly-built Erbil International Airport to welcome the guest of honor: none other than the Turkish Prime Minister Recep Tayyip Erdogan.

Just three years ago it was inconceivable for even the most optimistic person here to believe that a Turkish prime minister would ever set foot in Erbil, let alone receive such a welcome.

In February 2008, officials in Ankara were threatening Iraqi Kurdish leaders with a large-scale military invasion to punish them for allowing the guerillas of the Kurdistan Workers’ Party (PKK) to operate on their soil.

Erdogan’s arrival in Erbil at the helm of a large diplomatic and business delegation represented a high-level recognition of Iraqi Kurdistan, and with it the breaking of a long-standing taboo in Turkish foreign policy.

Also during his visit to Iraqi Kurdistan, the Turkish Prime Minister accompanied by the president of the Kurdistan region inaugurated the Turkish Consulate in the capital Erbil.

“We consider this to be a very historic moment,” said Massoud Barzani, the president of Iraq’s Kurdistan Region, during the official inauguration of the Erbil airport. “We believe that this visit will build a very solid bridge in bilateral relations between Iraq and Turkey and between the Kurdistan Region and Turkey in particular.”

The point was not missed by observers.

“When we recall how in the past his government was suspicious about the Kurdistan Regional Government (KRG) for all kinds of reasons, his [Erdogan’s] visit certainly looks like a major leap forward,” Cengiz Aktar, a columnist and political science professor at Turkey’s Bahcesehir University in Istanbul, told Rudaw.

Referring to Erdogan’s visit to the Shi-ite holy city of Najaf prior to his trip to Erbil, Aktar cautioned that it wouldn’t be wise to read it as a policy line vis-à-vis Iraqi Kurdistan separate from an overall Iraq policy. “Turkey won’t go so far as to privilege the north and neglect the rest of Iraq. The visit to Najaf is a clear sign of that,” he said.

Many consider business to be the major engine of the growing ties between Kurdistan Region and Turkey. The new airport in Erbil, built by the Turkish firm Makyol, is one of the many projects carried out by Turkish companies in Iraqi Kurdistan. During his visit Erdogan said that last year Turkey did more than $7 billion worth of business in Iraq, more than half of which took place in the three Kurdish provinces of Erbil, Sulaimani and Dohuk,
“We have historical and cultural bonds with Iraq and with this beautiful [Kurdistan] region,” said the Turkish prime minister during a speech at the airport, adding that Turkish Airlines, the country largest air carrier, will start regular flights to Erbil in mid-April in a bid to bring Turkey and Iraq closer together. “Now we will be connected by airways. But I don’t want to call it airways; I’d rather call it ‘the way of the citizens,’ and through this way of the citizens we will be connected to each other and connected to the rest of the world,” Erdogan said.

The burgeoning relations come despite longtime Turkish fears over the possibility of the establishment of an independent Kurdish state in northern Iraq. Turkey has, in recent years, adopted a policy of “zero problems” with its neighbors as part of efforts to enhance regional security and increase its influence in the region.

As Turkey and Iraqi Kurdistan rush to expand their ties, the major challenge to their bilateral relations is the ongoing conflict between the PKK and Turkish state.

The nearly three-decades long fight between the two sides has claimed approximately 40,000 lives, and with the recent termination of a unilateral PKK ceasefire, clashes might break out again in future.

Under Erdogan, Turkey has taken unprecedented steps in granting more rights to its considerable Kurdish population and has embarked on a process of opening up to its neighbors and the Middle East.

While Turkey’s uneasy relationship with its Kurds is often seen as a threat to the future of its ties to Iraqi Kurdistan, experts believe that it is also one area that could further those ties. Iraqi Kurdish leaders were believed to have played a major role in persuading the PKK to announce a ceasefire that lasted for over six months.

Amid the euphoria in Iraqi Kurdistan over Erdogan’s visit, some criticize the reception that was given to him.

“Our relations with Turkey are now normal, and there has been quite a good deal of progress in areas of economy and trade. But the relations are imbalanced and reluctant in the realm of politics,” said Hemn Mirani, an expert on Turkey and professor of political science in Erbil’s Salahaddin University. “The authorities in the Kurdistan Region hang thousands of Turkish flags in Erbil’s streets to welcome Erdogan, while last year Turkey was not ready to even put an Iraqi flag next to Kurdistan Region’s president.”
When Barzani visited Ankara last year, the fact that there was no Iraqi or Kurdish flag behind him during a press conference caused uproar in the Kurdish media; it was interpreted as Turkey’s unwillingness to give Barzani any weight in Iraqi politics.

Another major reason for Turkey’s interest in Iraqi Kurdistan is the region’s natural resources. In the past, the Kurdish government has awarded several contracts to Turkish companies, such as Genel Enerji, to drill and excavate oil. But the biggest prize is the strategic Nabucco pipeline that will transfer natural gas from northern Iraq to Europe through Turkey. Kurdistan’s minister of natural resources, Ashti Hawrami, said in early March that the Kurdistan Region sits atop “at least 45 billion barrels of oil and as much as 100-200 trillion cubic feet of gas.”
During Erdogan’s visit to Erbil, Hawrami met with his Turkish counterpart Taner Yildiz to “discuss energy cooperation,” but no statements were made to the media regarding the details of the meeting.

Hawrami had recently said that Kurdish gas reserves can supply the needs of the projected Nabucco pipeline—meant to transport oil and gas from northern Iraq to Europe via Turkey—for 100 years.
Currently Iraq’s oil is exported to Turkey through the Kirkuk-Ceyhan pipeline, which is controlled by Iraq’s federal government.



I spoke with John G yesterday about the difference between Sh-2 and Ah-1 APIs. Concens had been expressed about whether this means faulting is present.

He remains very upbeat and has a similar viewpoint expressed elsewhere about possible faulting. Providing there are no fault blocks which are dry, a degree of compartmentalisation can be a good thing. It offers the opportunity to have a bit more control over secondary or tertiary recovery operations. For example if waterflooding was implemented the injection water could be contained within a fault block.

IMO this is useful when implementing a trial or pilot of a secondary or tertiary recovery option where you are not sure if the option is the best one to maximise recovery. You can be more certain of containing the areal extent of the trial with less chance of fluids being injected into parts of the reservoir where it was not intended to go IF the fault block is effectively isolated from surrounding fault blocks. In that scenario analysis of the results is easier. (However faults can also make life more complicated when they are not totally sealing and allow restricted movement of fluids between fault compartments.)

Also IMO we should bear in mind that if fault compartments do exist in Shaikan each compartment could easily be much larger than most entire fields elsewhere in the world. This links in with the point made by others that providing the faulting does not reduce the average recovery per well it will have little impact. It can be a killer offshore where the high cost of subsea wells and subsea equipment requires a much higher recovery per well for the economics to remain attractive. However onshore in a development scenario we should expect drilling times and costs to decrease with the benefit of a learning curve and faulting or compartmentation should not be high on the list of concerns for an investor.

However I don’t believe he is entirely convinced yet that Sh-2 is fault separated from Sh-1. GKP thought there was a chance of the Sh-2 API(Atmospheric Pressure Ionization) being higher than Sh-1 because there are no seeps in the Sh-2 area. Also it appears that the early measurements of API in Sh-1 may not have been representative. There is a concern that the measured APIs may have been depressed by the presence of drilling fluid water (which has an API gravity of 10) in the well site sample measurements. It was held in a tight emulsion that was not detected initially. This would explain the Sh-1 Sargelu API increasing from 18.5 in DST 1 to 22.2 during the completion and extended tests (documented in the RSC Royal Society of Chemistry-report) as the well cleaned up and drilling fluids contamination decreased.

Crude oil is bought and sold on a "API gravity basis and high-gravity
oils command higher prices. Water lowers the "API gravity ...

The other factor casting doubt over a fault or some other form of barrier separating Sh-1 and Sh-2 is the pressure in Sh-2 which falls on the Sh-1 pressure gradient line. IMO if the barrier was pressure tight and preventing “homogenisation” of fluids there would be no reason to expect Sh-2 to fall on the same pressure gradient. It would be reasonable to expect the Sh-2 pressure to be controlled by the spill point in the eastern part of the field and the Sh-1 pressure to be controlled by the spill point in the western part of the field. There is no reason for the two spill points to be at the same depth as they could be as far as 30+km apart. If the field is in pressure communication throughout then the shallower of the two spill points controls the overall size of the accumulation and the field’s pressure profile.

The interpretation of a regional aquifer with a free water level at -2230m SS-SubSea remains unchanged. So far this well is lending further support to GKPs published interpretation. I believe had the Sh-2 DST 1=(DST - Drill Stem Test)
result been in marked disagreement with their interpretation, for example had it signalled either a much shallower Oil-Water Contact (OWC) or a much deeper OWC, then GKP would have been obliged to make that information public. So don’t believe any rumours by shorters about the OWC being shallower or the opposite by those seeking to promote a temporary long position.

On the question of whether a field this size can be fault or barrier free I come back to the point about partially sealing faults. Lots of fields have faults that are not sealing over geological time but can still have a major impact on pressure and flow continuity during the producing life of a field. If there is a barrier between Sh-1 and Sh-2 it may make the wells behave for production purposes as though they are in separate compartments even though in geological time everything has equalised between the two areas of the field.

I did not ask about SA-1 as IMO at this stage this is too price sensitive. (I know, I know that would be exactly the reason to ask him, lol!)

Still lots of questions to save for another day. As they were able to measure 26 API from Sh-2 does this mean much less fluid was lost to the formation in this well and why? Have they lowered mud weight? Or is more heat and/or demulsifiers being used to obtain more representative samples? Is the production plant able to produce crude with a low enough BS&W for the refiners or is there sufficient settlement time in the storage tanks to achieve this.

The Sh-2 API is more consistent with other oil in this part of Kurdistan. My understanding is that Tawke Field contains 25API in the Tertiary and 27 API in the Cretaceous.

The conversation also covered the performance of Sh-1 as documented by RSC. I had been concerned that the well had been showing signs of progressively poorer performance. In a downside scenario this could be interpreted as an inability of the matrix to support the high initial rates that could have been influenced by fracture permeabilities. Initial decline rates in fractured reservoirs can be high if the matrix permeability cannot feed the high permeability fractures at a high enough rate.

John G believes this is not the case and the problem related to drilling fluids damage that was been aggravated during ongoing operations. Certainly the RSC report documented some strange behaviour whereby the well suddenly produced 40% water cut during the completion test, which was believed to be related to vast amounts of fluids lost whilst drilling the well. Moreover the extended well test indicated an enormous skin of +56 which was indicating of severe plugging of the formation. He says that fortunately the carbonate reservoirs react well to hydrochloric acid (as you would expect) so IMO GKP believes the Sh-1 performance decline was not representative of long term production rates. I did not ask if they have acidized Sh-1 but the Sh-3 RNS indicates the intention to so and I expect we will hear the results in due course.

Data quality issues and teething problems frequently arise in new areas and this is producing some uncertainty in the evaluation of fluid properties and well performance. This uncertainty will reduce in time as optimal procedures are developed. In the meantime the technical picture and its implications for a large increase in OIP is holding up well.

BTW he has also heard the rumour about SNM perhaps testing water. He did use the word “rumour” and as such it is up to individual investors to decide whether they want to act on “rumour” or fact.

Certainly what information SNM has published is highly encouraging. Taken from the SNM March corporate presentation:

“Copious live oil encountered while drilling the majority of the reservoir sections.”
“RFT=Repeat Formation Tester pressure indicates the Jurassic is a single column of 20-24 API oil”
SNM interpreted over 180m pay in the Jurassic and over 70m additional pay calculated in the Cretaceous Garagu and Sarmord formations.

RKH investors, including myself, had the disappointment of a zone falling on an oil pressure gradient producing initially 80% water and then 100% water from an MDT(Modular formation Dynamic Tester
) dual packer test. However that zone was only 7m gross thick and the calculated water saturation was very high and the zone appeared to be a transition zone quite close to the water contact. Atrush-1 is rather different. The Jurassic gross thickness is 1000m! If the RFT pressure gradient is most of the Jurassic it is hard to see why the well would produce formation water. Water from drilling fluids perhaps but that will diminish if the well can be produced for an extended period.
At the in-laws today so must stop here as we are going to see Norwich City. How does the song go?
“On the ball, GKP, never mind the danger,
Steady on, now's your chance,
Hurrah! We've found another field.

While I am no legal expert, I find it very hard to conclude anything other than that the case has changed from being against “‘Gulf Keystone and two of its subsidiaries” to exclusively against Texas Keystone.This is my rationale....

1. From the RNS dated 29 December 2010

“The Board of Gulf Keystone announces that GULF KEYSTONE and TWO OF ITS SUBSIDIARIES (referred to for the purposes of this announcement only, as "the COMPANIES") received notice on 23 December 2010 that an arbitration ("the NYC Arbitration") was commenced by Excalibur Ventures LLC ("Excalibur").....

“The COMPANIES dispute the allegations and claims asserted in the NYC Arbitration and the Commercial Court Claim and intend to vigorously contest them.”
2. PFC30 then kindly copied in a Mirabaud update note on 29 December 2010:


This note contains the following extract:

“The claim stems from 2006, when Texas Keystone (a privately owned company operated by the broader Kozel family, and totally separate from Gulf Keystone) and Excalibur had a bidding agreement to enter Kurdistan together. Excalibur claimed to have sufficient funding and strong connections in Kurdistan - neither of which turned out to be true - in fact Excalibur failed to qualify as a potential licencee. The agreement expired in February 2007 and then in November that year a subsidiary of Gulf Keystone signed a production sharing contract with the Kurdistan Regional Government for the Shaikan and Akri-Bijeel exploration blocks, along with MOL and Texas Keystone.”
3. We now have, from the Court Hearings list for tomorrow:
(133-137, Fetter Lane, London, EC4A 1BT) - just round the corner of Fleet Street. This is 2-3 minutes walk from London offices of Goldman Sachs
Monday 04 April 2011
At 10:30
2010-1517 Excalibur Ventures LLC v Texas Keystone Inc (also known as "Texas Keystone Inc")Same v Same

So, “the COMPANIES” has clearly been replaced exclusively by ‘Texas Keystone’. If the others were still cited in the Court case, surely it would be ‘Excalibur Ventures LLC v Texas Keystone and Gulf Keystone... and whoever the other party was.

This also makes logical sense to me as the Mirabaud note clearly confirms that there was a relationship between Texas Keystone and Excalibur, and NOT between GKP and Excalibur.
As I mentioned recently, the Rejection of Legal Claims initially took the SP down 30% from 188’ish to 131.5p but the price subsequently settled at around 168 (about 10% off).
So, if the case has now been confirmed as exclusively against Texas Keystone, logic dictates that the 10% risk discount factor should very swiftly disappear.. and the price rise by a similar amount!

Although, please don’t build your hopes up too much - when have the markets ever acted logically as far as GKP is concerned?

GLA, scaramouche


boardman v phipps was about 2 trustees who turned a company around and made a tonne of money, they found out about the poor performing company through their roles as trustees (the trust had shares in the company), offered the oppurtunity to the trust (using trust funds to buy a controlling stake) but the trust rejected the oppurtunity, the trustees then went on to use their own funds and turn the company around and make a tonne of money, which the beneficiaries of the trust who had already made a profit from the rise in share price then sued the directors for the money they made under a breach of trust (slightly confusing case and completely unfair in my view! the trustees took all the risk yet the beneficaries got all the reward)
ps. trustee is someone who controls the trust, the beneficiaries are those who benefit from the trust

Exploration has no assets and only risks and thats the starting point!!Check with Desire Petroleum,they can certainly tell you that, so far as of now before any discovery!!

just to point out, the issue of Excalibur waiting for a tangible asset, doesnt matter look to the case of Boarman v Phipps - directors (trustees) made a tonne of money from a venture they offered to the beneficiaries (who declined to join the venture) but after the trustees bore the sole risk and made a profit the beneficiaries made a claim for the money the trustees made and got it all.
This case is about trusts but it also highlights agency and the point about waiting for an asset to gain before making a claim, which is completely legitimate.
on the same page they have different cases againt multiple defendants. They use the abbrevation "ors" for others. They don't use it on the Texas Keystone listing.
Still, it is not logical for the plaintiff to change the defendents unless it is a new petition and that would show weakness.

While I am no legal expert, I find it very hard to conclude anything other than that the case has changed from being against “‘Gulf Keystone and two of its subsidiaries” to exclusively against Texas Keystone.-------------------------------------------------------------
I doubt the defendants have changed. Why would the plaintiff do that when the whole point is to attach the claim (however dubious) to the Kurdistan assets where the value is. They probably just name the case notice after the main defendant.
without doubt that Rex was chancing!!If GKP have not found oil,there will be no suits at all!!

The test is that the business of GKP is exploration and production and it comes with enormous risks!!!However if Rex were to have introduced GKP or TKI to a provened Shaikan field already explored previously and billions of barrels of oil already discovered,that would have been different!!
As a genuine partner,one will have to take risks from the onset!!Unless Rex is the KRG,then the exploration risks will only be borne by the oil companies.

Worth remembering that TKI gave Rex the opportunity to get involved when they setup GKP but he could not raise the money required to buy into the 'new' company. The deadline came and went and is all well documented by TKI. That's why Todd believes that GKP and TKI have such a strong case. It also tells us that GKP was not created deliberately to exclude Rex or anyone else from the deal as they were originally invited. That's important IMHO as it puts a definite gap between TKI and GKP.

Secondly, Rex did not go to court immediately. He let GKP spend money to drill Shaikan-1 and contribute to MOL's drill of AB-1. In other words GKP and it's founders took on the risk but Rex did not. If both had been dusters would he still be taking this action against the company? I suspect this may count against Rex's claim in court unless he'd been in correspondence with GKP for several years trying to get something out of them. I haven't seen this sort of detail in any reporting associated with the case.

Finally, given the location of where GKP wanted to obtain licences, the fact that there was a war there only a few years previously and that in such an environment it's not unusual for companies to have to oil the wheels of progress then maybe Rex may know something uncomfortable enough to warrant a few quid(A cut, as of chewing tobacco) to send him on his way. If this is the case then we'll never hear about it and it will be settled out of court for a couple of million. In court I think Rex hasn't got a chance.

If I recall at the time Excalibur's claim was cited as an acting beneficiary only in a "introducer capacity" to TKI obtaining it's licence agreement with the KRG.

The only claim (IF this hold's up in court) is Excaliburs' monie's owing as allegded introducer. .....which it will have to prove.

History will prove that Excalibur on it's own limited abilities, resources, and experience (or lack of them more importantly) failed to obtain an exploration licence on it's own mettle(Courage and fortitude; spirit) and merits.

Pursuing a retrospective claim aimed initially at TKI or through implication attempting at a latter stage (dependant on outcome) involving the big fish 'GKP' would be highly contentious and brazen to say the least.

Kozell on countless occaisions has identified GKPs very own BoD Ali Qabandi through their earlier Business school / Economic meeting's in the ME as the catalyst and impetus for starting up GKP.

IMO "IF" Excalibur can prove anything remotely justifying a cost payment to them - it would be levieded to a small inconsequential "introducer's fee" and based on 2006's value. Not on a latter day figure with assets (oil) known and out in the open encouraging a pre-dated claim.

Law is a double edged sword, Excalibur will need a watertight case, as GKP one imagines would be looking to possibly counter claim / sue agains't damages or arbitration - resulting in a reduced market cap in an openly traded company.

The difficulty Excalibur will find is all dealings / signing's / contracts relating to GKP are with the KRG, and in compliance with Kurdistan law.......Excalibur in effect will partly be taking them on too.

Just rang an lawyer mate of mine, he also holds gkp, he says it sounds like an order to protect assets or a deal is is done and getting ratified in court to make it binding.................hope so...............he says its like a cva deal which a court rubber stamps..........lets see

It is a full time job to keep up with GKP news. Clearly the holding pattern in the £1.50's looked odd. Maybe we have our answer. Potentially 30% of GKP's assetts were under threat. Now it Looks like a percentage of 1.5%(30% of exalaburs interest in texas keystones 5% of GKP).Without this sounding as a deramp....but although it's texas keystone and they have only a 5% interest,I think excalibur are trying to say that GKP has benefitted from the link between these two entities.this is my concern and i am sure the derampers will use it at some stage.
The question is will GKP's sp be let off the lead?
BAGHDAD - A roadside bomb wounded Basheer Muhsin Kadhim, a director general at the National Investment Commission, when it exploded near his house, an Interior Ministry source said. A guard was wounded in the blast.

As this is the first appearance for this case it is likely that the applicant will set out their case, not in any great detail and If it's anything like criminal courts this will be an administration process with dates set for the next stage. I would be surprised to see anything other than case opened and a disclosure or case management date set. This could be interesting for us PI's especially if this progresses and the court orders in-depth disclosure from Texas Keystone of recovery / OIP figures.


legal representation. From lapsing agreements with Texas Keystone to trying to take GKP to court. I am not a legal eagle but i think this will be thrown out of court. Why? Exaluber waited until there was a tangable assett ie a find and production until their case. If ever there was a "fishinf expedition" this is it.
--------------------------------------------------------------------------------Someone was desperate enough to buy a few million shares last week, and I wonder why.
With SA-1 an unknown, SH-2 another week or so off, and SH-4 spud anytime.
Maybe they knew of the timing of the Court Case before Scaramouche found it, and are expecting GKP to win.

The 5% was relinquished by TK and belongs to share holders so if Excalibur wins the case it will surely be up to Todd to pay up, won't it?

It's as simple as that, nothing more nothing less. The original RNS said the claim is against two subsidiaries. It is possible they would be considered at different hearings depending on the substance of the claims and how they are worded.
Hedgefox is our excellant live reporter

Just a quick update on the court proceedings. Out for lunch at the mo ... re-convene at 2.00. It's very diffucult to give an informative summary so far as the language used in court is very technical ... mainly discussing previous cases that may influence the Judge's decision on the case. However, it would be safe to say that the legal team for GKP appear very strong and have spent the last 3 hours putting forward a convincing and extremely well put together case. The spirit of their argument seems to accuse Excalibur of delaying tactics regarding the case ... and also that GKP and Texas are not the same company. Obvious, I know, but there it is. The case will not be decided today, and I also understand that the GKP legal team are pushing for the case to be tried in England and not in NY as this would lead to legal difficulties. FWIW ... the GKP legal team appear stronger and more assured in their arguments, they also on the surface appear to have the ear of the judge Mrs Gloucester. --------------------------------------------------------------------------------
But in reality it's not that simple to draw the line between cases that are price sensitive and those that are non-price sensitive.

Ok this one is obviously in the price sensitive category, but for many cases it isn't so cut and dry.

Oil hits 32-month high as fears grow of the $150 barrel
Published Date: 09 April 2011

By Perry Gourley

OIL prices surged to their highest level - more than $125 a barrel - in 32 months yesterday amid concerns that ongoing unrest in the Middle East will further hit global supplies.
Gold prices also reached record highs and silver prices a 31-year peak as investors piled into commodities as the dollar fell on delays in US budget negotiations and debt concerns in the Euro zone.

The price of Brent crude rose by $3.61 to $125.87 yesterday evening. Some commentators now believe $150 is looming.

As well as ongoing unrest in the Middle East, concerns that postponed elections in Nigeria could spark a new wave of militant violence there and disrupt supply also contributed to the rise.

The International Monetary Fund has issued a warning that the disparity in demand and supply of oil is likely to push prices even higher and that markets could face further scarcity in oil supplies.

Rob Montefusco, an oil trader at Sucden Financial, said there was some "very large fund action piling into the market in oil and base metals".

Rajiv Biswas of IHS Global Insight also warned that the ability of oil companies to bring on new supplies was now being hindered by global unrest.

"Political risks in large, low-cost oil producers like Iraq and Iran mean that companies face considerable difficulties and restrictions in investing in these countries," he said.

The seven-week old civil war in Libya has cut the country's 1.6 million barrels per day (bpd) output by 80 per cent to an estimated 250,000 and 300,000 bpd.

It took Kuwait two years to restore oil production to pre-war levels of about 1.6m bpd after the 1991 Gulf war.

Fellow Opec member and significant producer Nigeria has postponed parliamentary elections again in some areas although polls will go ahead in most of the country today as planned.

The run-up to the elections has already seen a rise in violence in oil rich states such as Akwa Ibom and Balyesa.

Further supply worries have also emerged in Norway with reports that its crude oil output will be 118,000 bpd in May, significantly down from the provisional estimate of 160,000 bpd in April.

The continuing rise in commodity prices will be of serious concern to economic policymakers given their potential to hinder recovery. High oil prices were partly to blame for a profit warning yesterday from Dutch postal company TNT and Swiss perfume group Givaudan.

Analysts at JBC Energy said in a note:"Awash with still extremely cheap money - the leading policy approach to cope with the recession - the investment community is pouring record volumes into long commodity positions.

This drives not only fuel and food prices to record highs, but also raises the costs for other raw materials massively, clearly putting the economic outlook under threat."

Spot gold rose by more than $14 to $1,472.96 an ounce at one point yesterday afternoon. Silver reached $40.28 with some traders predicting a rally to $50 in the coming weeks.

Yesterday's slide in the dollar added fuel to a rally that has already taken gold through a number of record highs this year.

Saxo Bank senior manager Ole Hansen said : "The US budget impasse and the European Central Bank's rate hike have meant the dollar dropping to the lowest level since December 2009. This is undoubtedly a very important ingredient for the rally we have seen.

"New highs should now mean that the market will be looking to establish a new trading range above $1,450 which possibly could take us towards the $1,500 level."

Global Energy Leaders Identify Speculation as a Cause of Spiking Oil Prices
Posted by Josh Garrett on April 8, 2011 at 12:24 pm

Iraqi deputy prime minister for energy Hussain al-Shahristani spoke at the Paris oil summit on Wednesday. (image: Antoine Antoniol/Bloomberg via post-gazette.com)

At a conference of international leaders in the oil industry, the clear consensus was that oil prices will almost certainly continue to move higher in the near future, but beliefs about the causes of ongoing price increases were varied. Within the discussion of climbing oil prices, however, several conference attendees agreed that speculation and other financial influences are leading causes.

Oil executives and energy ministers from around the world met in Paris on Wednesday to discuss rising oil prices and the future of the industry, the New York Times reported.

Participants expressed concern over the recent run-up of oil prices and considered the best future courses of action for their respective companies and countries.

The who’s who of global oil players covered by the Times article offered four different potential causes for the jump in oil prices over the last two months: political turmoil in the Mideast, demand growth, domestic tax rates, and out of control speculation on oil markets.
CEO Christophe de Margerie of Total S.A., Europe’s largest private oil firm, pointed to nervousness over oil supplies in the Middle East and the effects of the Japanese nuclear crisis on the future of nuclear power and on oil demand.

He also attributed rising oil prices to greater global demand and higher production costs, telling the Times, “Demand plus costs are increasing — tell me how you could see a reduction in oil prices? We’d be very happy to see an oil price going back to $80, but I don’t believe it.”

De Margerie observed that current supplies are enough to meet short-term demand but that long-term demand growth will almost certainly bring supply tightness and continually increasing crude prices.

He made clear that conservation and increased reliance on alternative energy sources constituted the “best way” to avoid rising prices.

Other industry leaders seemed less concerned about current and future oil supplies.

Didier Houssain, director of energy markets for the International Energy Agency (IEA) stated that there is no “fundamental” reason for oil prices to keep climbing toward their 2008 all-time high of $147 a barrel.

“It’s not a repetition of 2008 because there is some slack in the market,” he told the Times.

Iraq’s deputy prime minister for energy Hussain al-Shahristani touted his country’s ability to head off future supply problems, saying that Iraqi oil would be “an assuring buffer for world oil supply in the coming decades.”

He weighed in on the cause of recent price increases, echoing statements by advocates for commodity speculation reform in the US and abroad with an observation that recent oil prices seem more affected by speculative investments than fundamental forces:

Oil prices have been surprisingly insensitive to supply and demand. Volatility in oil prices have been more due to speculation in futures market and political instability, as in the case of Libya.

Mohamed bin Dhaen al-Hamli, energy minister of the United Arab Emirates (UAE), agreed.

He noted that investors assuming a “worst-case scenario” are buying aggressively and driving up oil prices. More specifically, he opined that “speculation” played an important role in oil prices’ most recent multi-week rally.
Looking at ways to combat steeply rising oil prices, French industry minister Éric Besson said that as current president of the Group of 20 (G-20) economic organization, France will use oil supply data to “prevent potential manipulation” of oil markets.

The Times report also quoted former Nigerian oil minister and OPEC president Rilwanu Lukman, a dissenting voice on the causes of the rise in oil pries. Lukman called heavy taxation in consumer nations “the real cause of the problem.”

Several major players on the world oil market openly expressing their belief that opaque markets and unchecked speculation are leading causes of today’s inflated oil prices lends still more support to calls for regulation of major oil speculators. Here in the US, the CFTC still faces myriad obstacles on its way to implementing limits on commodity speculation.

But as more foreign oil luminaries get behind new regulation as a necessary measure to calm prices, the concern that American investors could skirt rules by heading to less-regulated foreign markets diminishes.

Whether or not indirect foreign support for market reforms will facilitate the writing and implementing of regulations that could calm heating oil and gasoline prices remains to be seen.



Asharq Al-Awsat] There is confusion related to the manner with which the central Iraqi government deals with the oil of Kurdistan and the contracts that the local government there has concluded.

[Al-Shahristani] The central government did not review and did not approve the contracts that the Kurdistan Region government concluded. The central government informed the companies concerned that they have no right to operate on Iraq's territories without its approval.

[Asharq Al-Awsat] Does this mean that the contracts that the regional government concluded are illegal?

[Al-Shahristani] Yes, they are illegal contracts. However, we agreed with the regional government that any oil produced in Iraq regardless of its legitimacy is the property of the Iraqi people and should be handed over to the Iraqi government that will market it and receive its revenues. In return, the Iraqi government shall compensate the regional government or the oil companies for the investment costs on condition that acceptable invoices are submitted and based on recognized prices in the world market. I can affirm that we have sufficient experience in this regard. The government of the Kurdistan Region accepted this settlement and it is handing over the oil on this basis. The oil that has been handed over was 115,000 barrels last week. It is all handed over to the Iraqi Oil Marketing Company and is pumped via the export pipe on the Kirkuk-Jehan pipeline

Asharq Al-Awsat Talks to Iraqi Deputy Prime Minister for Energy Hussein Al-Shahristani

By Michel Abu Najm

Paris, Asharq al-Awsat- Hussein al-Shahristani, the Iraqi Deputy Prime Minister for Energy, entrusted with coordinating among the Oil ministry, the electricity ministry, and the water ministry, was warmly received by the French authorities on the occasion of his visit to Paris to participate in the 12th "petroleum summit" organized by the French Institute for Petroleum and the Petro-Strategy magazine that is specialized in the fields of oil and gas. Al-Shahristani has met with French Industry Minister Eric Besson and Foreign Minister Alain Jupe. He will also meet with Economy Minister Christine Lagarde and Foreign Trade Minister Pierre Lellouche as well as officials in several major companies interested in the Iraqi oil and non-oil markets. In an exclusive interview with Asharq Al-Awsat, the Iraqi minister said that the French officials emphasized that Paris "is urging" French companies to invest in all the sectors of the Iraqi economy, particularly since such investments will enjoy "full" official backing. The text of the interview is as follows:

[Asharq Al-Awsat] What is the future agenda of the Iraqi oil sector pertaining to additional offers that you will make to world companies?

[Al-Shahristani] You know that we have signed contracts with the largest oil companies in the world in order to raise the volume of Iraqi oil production from its current rate of about 2.5 million barrels per day to reach an increase of 10 million additional barrels in the next six or seven years. We estimate that this increase will be sufficient to meet the rising need for oil in the foreseeable future. That is why - despite the fact that Iraq has many huge oil fields - my tour did not include first and second licenses. We are not planning to raise our energy production to a higher level based on our assessment of the oil market over the coming two decades. Demand for oil is expected to rise by about 20 million barrels per day to 106 million barrels per day. Meeting such a demand should come primarily from the OPEC countries. The response to such a demand should come primarily from the OPEC countries. Thus, we believe that Iraq has a major role to play in the oil market to meet its rising needs.

[Asharq Al-Awsat] Does this mean that there will be no third tour of licenses in the foreseeable future?

[Al-Shahristani] We had a third tour to develop the gas fields. There will be a fourth tour this year but it will be confined to the exploration fields by surveying the areas that have not yet been explored. Thus, the contracts that will be awarded will not be production contracts. We expect large quantities of oil and gas to be discovered because 70 percent of the previous exploratory operations discovered these two substances.
[Asharq Al-Awsat] There are discrepancies between Iraq's official expectations and the studies published by the International Monetary Fund [IMF] that argue that there are two scenarios to Iraqi oil: The first scenario is low, expecting a production capacity of five million barrels per day by 2016. The second scenario is more optimistic and does not rule out the possibility of reaching a production capacity of 10 million barrels per day. Both these scenarios are distant from your expectations. My question to you is: Where lies the discrepancy?

[Al-Shahristani] There is a misunderstanding; we talked about 12 million barrels per day. This figure is contractual; in other words, this is what we reached with the oil companies with which we concluded contracts. They are committed to raising our production capabilities to this figure. The IMF studies, however, did not talk about production capacities but about production itself. This applies to other countries, like Saudi Arabia, whose production capacity is 12 million barrels per day but its actual production is about nine million barrels per day. What we are talking about is the contractual commitment with the oil companies to reach a production capacity of 12 million barrels per day within six or seven years. In this context, I wish also to add that Iraq's national strategy is not to maximize production but to maximize revenues. This point is dependent on oil prices. Thus, our plan is not to flood the market with crude oil and thus threaten prices. The result will be less revenue.

[Asharq Al-Awsat] The IMF has other reservations pertaining to Iraq's ability to export its oil. Would you describe the current situation and give us an idea about your future expectations?

[Al-Shahristani] It is true that the bottleneck of Iraqi oil is our exportation capabilities, especially from the south where the bulk of our oil is exported. At present, we are limited by this exportation capability. However, we have concluded contracts to expand our exporting abilities and to implement them well via four new floating export ports. The construction of two of these offshore ports will be completed by the end of this year and the other two ports will be completed by the middle of next year. The export capacity of each will be about 900,000 barrels per day. The government will fund three of these ports while the fourth will be funded by a loan from Japan. Naturally, these new constructions will raise our export capabilities so high that we may not have enough produced oil to export if we wish to use all our export capabilities. That is why we may suspend operations in several export facilities for maintenance and renovation as we wait for the increase in production and export capabilities.

[Asharq Al-Awsat] There is confusion related to the manner with which the central Iraqi government deals with the oil of Kurdistan and the contracts that the local government there has concluded.

[Al-Shahristani] The central government did not review and did not approve the contracts that the Kurdistan Region government concluded. The central government informed the companies concerned that they have no right to operate on Iraq's territories without its approval.

[Asharq Al-Awsat] Does this mean that the contracts that the regional government concluded are illegal?

[Al-Shahristani] Yes, they are illegal contracts. However, we agreed with the regional government that any oil produced in Iraq regardless of its legitimacy is the property of the Iraqi people and should be handed over to the Iraqi government that will market it and receive its revenues. In return, the Iraqi government shall compensate the regional government or the oil companies for the investment costs on condition that acceptable invoices are submitted and based on recognized prices in the world market. I can affirm that we have sufficient experience in this regard. The government of the Kurdistan Region accepted this settlement and it is handing over the oil on this basis. The oil that has been handed over was 115,000 barrels last week. It is all handed over to the Iraqi Oil Marketing Company and is pumped via the export pipe on the Kirkuk-Jehan pipeline.

[Asharq Al-Awsat] In addition to oil, you are in charge of natural gas. What are your expectations for this sector?

[Al-Shahristani] I told you that we will conduct a fourth round of licensing world companies.

[Asharq Al-Awsat] Any specific date?

[Al-Shahristani] I do not have an exact date but we will announce this in the coming weeks. There are 12 big lots that will be allocated to explorations in all the Iraqi territories from the west to the east to the north and to the south. We expect these explorations to raise our gas reserves that are 112 trillion cubic feet at present. This figure is expected to increase dramatically. As for our oil reserves, the announced and audited figure is 143 billion barrels to which can be added another 30 billion barrels from the Kurdistan Region. Thus, the total will reach 173 billion barrels.

[Asharq Al-Awsat] In other words, Iraq will become the third largest oil reserve in the world.

[Al-Shahristani] Why the third?

[Asharq Al-Awsat] There is Saudi Arabia and Venezuela.

[Al-Shahristani] We are talking about the conventional oil dug from the ground, not about the heavy oils or the oil extracted from oil sands. Based on this yardstick, Iraq has the second oil reserve in the world.

[Asharq Al-Awsat] Will Iraq rejoin OPEC? Will it go back to producing oil in accordance with the quota system of this organization?

[Al-Shahristani] As you know, Iraq is a founding member of OPEC. However, we do not see the need to return to the quota system in the foreseeable future. Everybody agrees that in the past period, Iraq did not obtain the share that it deserves from oil exports. Thus other countries profited from this "in lieu" of Iraq. Thus, Iraq needs to compensate what it lost in the past years; it also needs oil revenues for reconstruction. At any rate, the subject has not yet been raised and we do not have a deadline regarding it.


Reverse Fault Drlling :
SA1 is (2,685 meters on the 7th)
Deloitte did the financial audit...


Iraq adds more red tape to visa process

Passengers wait to go through customs at Baghdad International Airport. (MOHAMMED AMEEN/Reuters)

By BEN LANDO AND STAFF of Iraq Oil Report
Published April 6, 2011

BAGHDAD - Iraq has added another bureaucratic barrier for foreign investors wishing to enter the country. Single-entry visa holders now have to pay an $82 fee at the airport, in addition to the previously existing visa fees and procedures.
Investors, diplomats, and oil company officials have complained for months that it has been nearly impossible to obtain visas. Executives and contractors in the oil sector say that the problem has begun to increase project costs and delay oil development, and no solution is in sight.

Many oil companies have 20-year contracts designed to boost Iraq’s oil production. Their work depends on hundreds of foreign employees, who have largely been unable to obtain even single-entry visas, let alone the multiple-entry visas they need for their frequent travel in and out of the country. Recently, workers for a variety of oil-related firms representing billions of dollars of planned investment were only able to obtain one-month tourist visas.
Last month, Iraq Oil Report learned that the visa problems stem from a new policy instituted by Prime Minister Nouri al-Maliki, which required many important categories of visas to be approved directly by his office. The effect was a near-total freeze on visas for investors and contractors.

The new fee on single-entry visas went into effect three days ago, according to an Interior Ministry official familiar with the new policy, who added that the ministry’s visa office has already fielded several complaints.

The source said that several organizations have received exemptions: human rights organizations, the International Committee of the Red Cross, people with official residency status in Iraq, anyone who has received an exemption from Maliki's office, and the construction and services company KBR.

Despite visa issues, some foreigners have been getting into the country. On March 24, the Iraqi British Business Council (IBBC), which promotes British investment in Iraq, obtained visas for 25 delegates attending a conference in Basra.

At least some of those delegates had not secured visas before traveling to Iraq, however. They were met at the Basra airport by a prominent local official who smoothed their path through customs, according to three people with knowledge of the delegates’ visit.

Neither Iraq’s Interior Ministry officials nor the prime minister’s office have announced or clarified the recent changes in visa policy. Until Iraq can unravel the red tape, foreign investors will have to keep improvising solutions.

Iraqi staff reporting from Baghdad are anonymous for their security. Ben Van Heuvelen contributed from New York.


Some highlights in terms of short-term price drivers (caps mine):
JB Gerstenlauer
Chief Operating Officer


Oil-in-place volumes are being recalculated based on the Shaikan-2 results and an upgrade will be provided IN THE NEAR FUTURE.”

“The pressure gradients at the Shaikan-2 location are consistent with readings at Shaikan-1. This has increased the depth of the lowest known oil column and will lead to a MATERIAL INCREASE in the P90 oil-in-place. Updated oil-in-place estimates will be reported IN THE COMING WEEKS.”

3D Seismics
“Early results fully support the structural assumptions from the analysis of the earlier 2D seismic lines.”

So what might these assumptions be? I can't find anything other than alluding to OWC pressure data and structural trends from investor presentations and reports. Here's a flavour from the 2D seismic interpretations:

*Assumptions made about the reservoir parameters used in the calculations are based on either published data from analagous fields in Kurdistan and Northern Iraq or the Company’s best estimates at this time. (Feb 2009 Investor Presentation, p.24)

*(Sheikh Adi) On trend with Shaikan structure (Sept 2009, p.10)

Sheikh Adi
“Upon drilling out of the casing into what was expected to be the first of the primary target intervals it was discovered that the borehole had crossed a reverse fault and approximately 400 metres of Cretaceous interval still remained to be drilled before reaching the Jurassic... Drilling operations have finally reached the Jurassic and well operations are on- going. At 7 April 2011 the well was at a depth of 2,685 metres.”

Ber Bahr
Snooze til xmas I'm afraid...

So- material increase in P90 figure for Shaikan in the coming weeks. Sheikh Adi news in the coming weeks too. And Sh-2 continues to turn the drill bit.

And I read the 3D seismic snippet as again hinting (quite strongly) at Sheikh Adi being an extension of Shaikan...


Friendly takeovers

Before a bidder makes an offer for another company, it usually first informs the company's board of directors. If the board feels that accepting the offer serves shareholders better than rejecting it, it recommends the offer be accepted by the shareholders.

In a private company, because the shareholders and the board are usually the same people or closely connected with one another, private acquisitions are usually friendly. If the shareholders agree to sell the company, then the board is usually of the same mind or sufficiently under the orders of the equity shareholders to cooperate with the bidder. This point is not relevant to the UK concept of takeovers, which always involve the acquisition of a public company.

Hostile takeovers

A hostile takeover allows a suitor to take over a target company whose management is unwilling to agree to a merger or takeover. A takeover is considered "hostile" if the target company's board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firm intention to make an offer.

A hostile takeover can be conducted in several ways. A tender offer can be made where the acquiring company makes a public offer at a fixed price above the current market price. Tender offers in the United States are regulated by the Williams Act. An acquiring company can also engage in a proxy fight, whereby it tries to persuade enough shareholders, usually a simple majority, to replace the management with a new one which will approve the takeover. Another method involves quietly purchasing enough stock on the open market, known as a creeping tender offer, to effect a change in management. In all of these ways, management resists the acquisition but it is carried out anyway.

The main consequence of a bid being considered hostile is practical rather than legal. If the board of the target cooperates, the bidder can conduct extensive due diligence into the affairs of the target company, providing the bidder with a comprehensive analysis of the target company's finances. In contrast, a hostile bidder will only have more limited, publicly-available information about the target company available, rendering the bidder vulnerable to hidden risks regarding the target company's finances. An additional problem is that takeovers often require loans provided by banks in order service the offer, but banks are often less willing to back a hostile bidder because of the relative lack of information about the target available to them.

Thoughts on takeover
A company would have to buy 30% of GKP's stock. Then the price that they obtain these shares at has to be offered to the rest of the 70% shareholders.

30% is the point at which a company has to proceed with a takeover. A takeover can occur without a single share being bought beforehand. If a company owns 30% of a company, it has to make an approach and the price cannot be less than the highest price paid to buy the 30%. Only if an approach is rejected does it go hostile, which can occur at any %age holding.

I have found the guessing game regarding GKP quite difficult.
I have therefore decided to ring the company when i have questions which i would like an opinion on.

This discussion is my own recolection and should not be taken as representation of GKP's position on any subject.
The court case
GKP will be making some sort of statement regarding the court case over the next days.

The expectation currently is that Shaikan has 13 to 18 billion barrels oip.
The current thought are that these assetts will be proven up by the end of this year.
Ber Bahr
The spudding should take place in the next few weeks.

Tender document
This is just a document and may/may not take place.


My opinion is that GKP want to have a healthy looking balance sheet. Whilst another 26000 barrels of oil a day is not massive at 50% discount to the local market it is still revenue. I assume that this is for sh2. So we have 20000 from sh1 and sh3 thats 46000 a day. Plus SH4 5 and 6 possibly. It could mean close to 100000 to the local market. This is pure speculation on my part.

The reason for the above is that if GKP runs as a going concern for some time before a takeover revenue will be needed.

Thoughts on takeover
228 million share have to be bought. This would lead to a massive increase in share price. So the question is where would the purchase of 228 million shares leave us? As soon as the 3% threshold is hit the market has to be informed. Not going to be very many sellers thereafter. At that rate the shareprice would increase marketly.

Maybe we are a little to concerned about this.


Shaikan field: Up to 7.52 Bn bbls
Posted 11.04.2011 11:22:23 av John Bradbury

Kurdistan explorer Gulf Keystone has announced between 1.52 Billion and 7.52 Billion barrels of gross oil-in-place for its world-class Shaikan field with its latest annual results.

Gulf Keystone, which is partnering with Hungary's MOL in the Shaikan discovery in Kurdistan, said the new oil in place figures are a significant increase for the field after independent evaluation by Dynamic Global Advisors.

“Ryder Scott's independent evaluation confirmed DGA's previous assessments with estimated gross total PIIP [potential initially in place] between 1.52 billion barrels (P90) and 7.52 billion barrels (P10), with a mean of 4.04 billion barrels,” the company declared today.

After completing acquisition of 599 sq. km of new 3D seismic data over the Shaikan field, Gulf Keystone has also completed a first Jurassic production well in the Sargelu formation on the Shaikan 1 well, which is flowing into extended well test facilities. Domestic sales from the Shaikan 1 well commenced last October.

A Shaikan 3 appraisal well which spudded last September to evaluate a Cretaceous zone was completed as a producer achieving production of 9,800 b/d following acid treatment, and a Shaikan 2 deep appraisal kicked off last December which has tested at 8,064 b/d of oil, and a Shaikan 4 deep appraisal well has also been completed.

At the end of 2010, Gulf Keystone reported a cut in after tax losses of US $26.0 million from $96.3 in 2009 and cash, cash equivalents and liquid investments in hand of $211.4 m (2009: $19.2 m).

Gulf Keystone's chairman and chief executive Todd Kozel described 2010 as a year of unprecedented activity: “We continued to work hard and fast to capture the full potential of our world class acreage in the Kurdistan region of Iraq,” he said.

“Our ongoing exploration and appraisal campaign, spanning all four of our blocks, is amongst the most aggressive of any company active in the Kurdistan region of Iraq today. The resulting progress that has been made, in a relatively short timeframe, has been remarkable by any standards,” Kozel added.

This year Kozel said momentum has continued, and he pointed out the company's current work programme is fully funded to help Kurdistan develop its natural energy resources.



Seventh: the second reading of the draft law the First Amendment to the Investment Law liquidation of crude oil No. (64) for the year 2007. (Commission on oil and energy).

Iraqi Parliament Schedule April 12 – April 14
Posted: April 11, 2011 by

Parliament Schedule of Events for Tuesday April 12, 2011 (52nd Session begins at 10:30 am):

First: read verses from the Koran.

Second: Al-Fatiha read the spirit of late MP (Mohammad Awad) for the passage of the fourth anniversary of the terrorist bombing in which he was the House of Representatives.

III: Voting on the bill abolishing the Revolution Command Council Decree No. dissolved (349) for the year 1991 (Legal) Committee.

IV: Voting on the bill abolishing the dissolved Revolutionary Command Council No. (100) for the year 1995 (Legal) Committee.

Fifth: The re-vote on the Law of the Ministry of Tourism and Antiquities in principle.

Sixth: the subject of attack and the targeting of the life of MP (Sardar Abdullah) in the district of Clare.
Seventh: the first reading of the proposed law the rules of procedure (Legal) Committee.

Eighth: the first reading of the draft law profiles Development Administration (Legal) Committee.

IX: the first reading of a bill the opinion. (Legal) Committee.

Tenth: the second reading of the proposed law setting aside of the dissolved Revolutionary Command Council No. (800) for the year 1989. (Legal) Committee.

Eleventh: the second reading of the proposed law setting aside of the dissolved Revolutionary Command Council (96), 1995 (Legal) Committee.

Parliament Schedule of Events for Wednesday April 13, 2011 (53rd Session begins at 1:00 pm):
First: read verses from the Koran.

Second: the first reading of the draft Law on the Ministry of Industry and Minerals (Committee on economy, investment and ages).

Third: the first reading of the draft Law on the Ministry of Commerce (Committee on economy, investment and ages).

Fourth: the first reading of the draft Renewable Energy Law (International Committee of the economy, investment and ages).

Fifth: The first reading of the bill of Communications and Informatics (Services Committee and ages).

Sixth: The first reading of the bill board of Information and Communications (Committee for Services and ages).

Seventh: The second reading of the proposed abolition of Revolution Command Council dissolved No. (487) for the year 1991 and the number (293) for the year 1992 (Legal) Committee.

Eighth: the second reading of the proposed law setting aside of the dissolved Revolutionary Command Council No. (190) for the year 1994 (Legal) Committee.

Parliament Schedule of Events for Thursday April 14, 2011 (54th Session begins 10:30 AM):
First: read verses from the Koran.

Second: The vote on the draft law the Supreme Judicial Council. (Legal) Committee.

Third: The first reading of the anti-smoking bill. (Commission on Health and the Environment).

Fourth: the first reading of the bill abolishing the Revolution Command Council dissolved No. (1194) for the year 1983 and the number (456) for the year 1985. (Finance Committee).

Fifth: The first reading of the bill the residence of foreigners. (Commission on Security and Defence).

Sixth: the first reading of the bill abolishing the Coalition Provisional Authority Order No. dissolved (68) for the year 2004. (Commission on Security and Defence).

Seventh: the second reading of the draft law the First Amendment to the Investment Law liquidation of crude oil No. (64) for the year 2007. (Commission on oil and energy).
Parliament wants role in Iraqi oil deals
Parliament wants role in Iraqi oil deals

A worker adjusts the valve of an oil pipe at West Qurna oilfield in Iraq's southern province of Basra November 28, 2010.(ATEF HASSAN/Reuters)
By BEN LANDO of Iraq Oil Report
Published April 12, 2011
Iraq’s Parliament is attempting to claim some authority over the country’s oil sector – showing a willingness to challenge Prime Minister Nouri al-Maliki’s administration, which has sought to centralize control of Iraq’s energy policy within the executive branch.

Adnan Janabi, the new chairman the Oil and Energy Committee of Parliament, said standing law requires oil and gas contracts to be approved by Parliament, including deals already awarded in the licensing rounds and...

Iraq’s Parliament is attempting to claim some authority over the country’s oil sector – showing a willingness to challenge Prime Minister Nouri al-Maliki’s administration, which has sought to centralize control of Iraq’s energy policy within the executive branch.

Adnan Janabi, the new chairman the Oil and Energy Committee of Parliament, said standing law requires oil and gas contracts to be approved by Parliament, including deals already awarded in the licensing rounds and a draft joint venture with Royal Dutch Shell to capture natural gas.

In an interview with Iraq Oil Report, Janabi said that, under Iraq’s current legal regime, "each upstream contract" must adhere to a stringent 1967 law that requires Parliament to sanction each deal.

Iraq has signed a dozen oil deals and three natural gas contracts with the world's largest oil firms, such as ExxonMobil, BP, Eni of Italy, the Chinese National Petroleum Corp. and Russia's Lukoil, in an effort to increase oil production capacity from 2.7 million barrels per day (bpd) now to more than 13.5 million bpd in seven years.

"We still believe that these contracts should be visited by the representatives of the people to assess," Janabi said, "in order to sustain or revise if need be."

Iraq's Cabinet and Oil Ministry have said the deals don't require parliamentary approval because they don't offer any control or ownership of Iraqi oil to foreign companies.

Janabi said the committee has asked for a copy of the draft contract between the state-run South Gas Company, Shell and Mitsubishi to form the Basra Gas Company, which would aim to capture and process the 700 million cubic feet of associated gas – currently generated by crude-oil production – flared each day due to a lack of infrastructure.

The deal has been criticized since it was announced in September 2008 for being awarded and negotiated behind closed doors under terms that remain secret. The deal has seen numerous iterations; it was most recently amended by the Oil Ministry and their outside attorneys, and sent to the Cabinet's energy committee for a review and an upcoming vote.

"Full transparency between the Council of Ministers and the Council of Representatives is a must and not an option,"
Janabi said.

There are, however, exceptions.

Janabi said the dispute between Baghdad and the semi-autonomous Kurdistan Regional Government (KRG) over the latter's 37 oil contracts with international oil companies (IOCs) would not be a Parliamentary matter, even though those contracts, which give companies an ownership stake in the oil fields, qualify for Parliamentary oversight based on the 1967 law.

The central government has asserted that the KRG oil deals constitute an illegal usurpation of authority over the oil sector, and KRG-signed firms were blacklisted from Baghdad-awarded contracts or oil purchases.

Meanwhile, work on the KRG fields has continued. The pace is slow, however, because there has been no guarantee of payment to the contractors, which earn a cut of the oil produced. Earlier this year Iraqi Prime Minister Nouri al-Maliki and KRG Prime Minister Barham Salih struck a compromise that led to production from the KRG's Tawke (Norway's DNO) and Taq Taq (Turkey's Genel Enerji and China's Sinopec) fields to begin exporting into the country's pipeline into Turkey.

"The recent agreement between the federal government in Baghdad and the KRG earlier this year will govern the standings and proceedings of these contracts," Janabi said.

Few details of the Maliki-Salih agreement have been made public, fueling the speculation that the deal is tenuous at best and criticism of ongoing secrecy in the country's oil sector.

In a statement published Monday on the KRG's website, Salih said Baghdad is supposed to pay the KRG a specific amount from the oil sales, which is then to be given to the contractors.

“The KRG has today presented its first oil export statement to the federal Finance Ministry for over five million barrels of oil delivered to SOMO since the commencement of export earlier this year," Salih said in the statement. "The KRG expects to receive from Baghdad its first payment for the Kurdistan Region contractors, as previously agreed with Prime Minister Maliki.”

Deputy Prime Minister for Energy Affairs Hussain al-Shahristani, the former oil minister, told a Paris energy conference that KRG contractors would be paid for their costs – once invoiced and audited – but not any oil or profits, according to a transcript of the conference


Transcript of the conference reported by Reuters
Parliament wants role in Iraqi oil deals

The new chairman of the Parliament Oil and Energy Committee said all of Baghdad's contracts – past and future – should be reviewed, perhaps altered.

Published April 12, 2011

Iraq’s Parliament is attempting to claim some authority over the country’s oil sector – showing a willingness to challenge Prime Minister Nouri al-Maliki’s administration, which has sought to centralize control of Iraq’s energy policy within the executive branch.

Adnan Janabi, the new chairman the Oil and Energy Committee of Parliament, said standing law requires oil and gas contracts to be approved by Parliament, including deals already awarded in the licensing rounds and a draft joint venture with Royal Dutch Shell to capture natural gas.

In an interview with Iraq Oil Report, Janabi said that, under Iraq’s current legal regime, "each upstream contract" must adhere to a stringent 1967 law that requires Parliament to sanction each deal.

Iraq has signed a dozen oil deals and three natural gas contracts with the world's largest oil firms, such as ExxonMobil, BP, Eni of Italy, the Chinese National Petroleum Corp. and Russia's Lukoil, in an effort to increase oil production capacity from 2.7 million barrels per day (bpd) now to more than 13.5 million bpd in seven years.

"We still believe that these contracts should be visited by the representatives of the people to assess," Janabi said, "in order to sustain or revise if need be."
Iraq's Cabinet and Oil Ministry have said the deals don't require parliamentary approval because they don't offer any control or ownership of Iraqi oil to foreign companies.

Janabi said the committee has asked for a copy of the draft contract between the state-run South Gas Company, Shell and Mitsubishi to form the Basra Gas Company, which would aim to capture and process the 700 million cubic feet of associated gas – currently generated by crude-oil production – flared each day due to a lack of infrastructure.

The deal has been criticized since it was announced in September 2008 for being awarded and negotiated behind closed doors under terms that remain secret. The deal has seen numerous iterations; it was most recently amended by the Oil Ministry and their outside attorneys, and sent to the Cabinet's energy committee for a review and an upcoming vote."Full transparency between the Council of Ministers and the Council of Representatives is a must and not an option," Janabi said.

There are, however, exceptions.

Janabi said the dispute between Baghdad and the semi-autonomous Kurdistan Regional Government (KRG) over the latter's 37 oil contracts with international oil companies (IOCs) would not be a Parliamentary matter, even though those contracts, which give companies an ownership stake in the oil fields, qualify for Parliamentary oversight based on the 1967 law.

The central government has asserted that the KRG oil deals constitute an illegal usurpation of authority over the oil sector, and KRG-signed firms were blacklisted from Baghdad-awarded contracts or oil purchases.

Meanwhile, work on the KRG fields has continued. The pace is slow, however, because there has been no guarantee of payment to the contractors, which earn a cut of the oil produced. Earlier this year Iraqi Prime Minister Nouri al-Maliki and KRG Prime Minister Barham Salih struck a compromise that led to production from the KRG's Tawke (Norway's DNO) and Taq Taq (Turkey's Genel Enerji and China's Sinopec) fields to begin exporting into the country's pipeline into Turkey.

"The recent agreement between the federal government in Baghdad and the KRG earlier this year will govern the standings and proceedings of these contracts," Janabi said.

Few details of the Maliki-Salih agreement have been made public, fueling the speculation that the deal is tenuous at best and criticism of ongoing secrecy in the country's oil sector.

In a statement published Monday on the KRG's website, Salih said Baghdad is supposed to pay the KRG a specific amount from the oil sales, which is then to be given to the contractors.

“The KRG has today presented its first oil export statement to the federal Finance Ministry for over five million barrels of oil delivered to SOMO since the commencement of export earlier this year," Salih said in the statement. "The KRG expects to receive from Baghdad its first payment for the Kurdistan Region contractors, as previously agreed with Prime Minister Maliki.”

Deputy Prime Minister for Energy Affairs Hussain al-Shahristani, the former oil minister, told a Paris energy conference that KRG contractors would be paid for their costs – once invoiced and audited – but not any oil or profits, according to a transcript of the conference reported by Reuters.


Brilliant post BBBS.... and excellent to see you right back on form!

Your comments on Sheikh Adi and Shaikan, plus the suggestion that a ‘Full to spill’ announcement could come sooner than we may have expected certainly sets the pulse racing somewhat and, for me, has largely offset what has been yet another disappointing day for the SP!

But it also makes me wonder – if GKP now firmly believe that the ‘full to spill’ scenario is likely, could it have some repercussions that we have not talked about much lately?

As I have posted before, GKP has a history of raising money from institutions and high net worth investors via placings just ahead of Major News. We may not like it much, but it certainly happens!

At the last AGM in August 2010, GKP also gained consent to issue more shares up to an overall total of 900 million being authorised. Given that there are currently around 762 million shares, there is perhaps a small window of opportunity for one last placing of up to 138 million shares before the AGM on 16 June 2011. And at a price of, say, 150p per share that would raise just over £200 million.

But why might they want to do so now, when they are already funded for the scheduled drilling programme until the end of Q1 2012?

The clues might be in the latest annual report, plus news items from the end of the last year:

1. There is a lot of talk now about a pipeline to allow them to link to the main production pipeline 50 kilometres away. The cost of this would be in the region of £50 million, I believe, based on Ewen’s comments in the past.

2. Drilling in Kurdistan is proving much more challenging, time-consuming, and therefore costly than might have been envisaged. Sheikh Adi is likely to take 4 months longer than planned, which will probably increase GKP’s costs by a few million pounds, and this might be replicated elsewhere. So to increase the contingency for all drills by say another £50 million would not go amiss IMHO.

3. A healthy balance sheet has allowed them to emphasise the ‘going concern’ status which the FT last year was at pains to publish was allegedly a major risk. And an even healthier balance sheet would also augur well for FTSE entry later this year – I know that I have repeatedly made my opinion known about this, but I am sick and tired of the detrimental effects that the AIM market seems to be having on GKP’s quest for fair value.

All of these factors might make the idea of further funding something worth considering. But the question I am most interested in is whether GKP might NEED more money should the long anticipated release of a major discovery at Sheikh Adi arrive.

Several appraisal wells have already been earmarked for Shaikan. But there was nothing in the January 2011presentation to cater for Sheikh Adi being fully appraised after SA-1 completes.... or proves to have a Major Discovery!


Wouldn’t Sheikh Adi need to follow a similar path to Shaikan, which has wells up to SH-7 earmarked (see p.20), and don’t GKP seem hell-bent these days on proving up their assets as quickly as they can?

Yes, I know people tend to fear ‘dilution’. But, while previous placings have seen the SP first fall back to the level of the placing (or below), it has often been followed by a swift surge upwards. Personally, I would not therefore fear a placing on such a scale, if it meant that GKP became an even more solid, robust company with no longer any hints of the tag of exploration minnow and concrete plans for those funds. And the recent bewildering SP movement does also seem to have some of the hallmarks of a potential placing.

Anyone who is encouraged by the awesome OIP prospects for GKP, the latest political developments in Iraq/Kurdistan, and the prospect of investing in what could soon be a significant OIL PRODUCER might easily be persuaded to part with some millions at 150p a share, rather than have to take their chances chasing shares on a market where the SP might, like an awakening volcano, be almost ready to erupt.

Before anyone else mentions it, I do also appreciate that payments for production would swiftly offset the need to raise further cash, but I wonder whether GKP might feel that having extra cash in the bank now would be a worthwhile move.
Please note that I am not saying that I think there is a placing going on behind the scenes but that, with GKP, anything is possible. The May 2010 funding was perhaps fairly predictable in retrospect, but the October 2010 one came right out of the blue.

Anyway, this is all simply fuel for thought! I am not expecting everyone to agree with me that a placement is a realistic possibility.

But I do have one final question - why does anyone think that GKP has moved their AGM date nearly 2 months forward compared to last year? Do you think they might have something fairly major to tell us?

Your comment:
"I think it's starting to finally wear me down and seeing my profits disappear and at times yearly wages lost on a daily bases I'd be lying if I said I'm not gettin fed up of it.
I believe Gkp blocks are full, from Bbbs gramacho sandunes and info from
Emails but trying hold my nerve is not getting any easier. I intend to hold till takeover and I hope I manage to do so. Anything over 2 £ at the minute would help settle the nerves."

You're definitely not unusual in feeling like that, my friend!

I imagine most of us feel the same SOMETIMES if we are heavily invested in GKP. It is almost inevitable - and I promise you, I can get just as agitated with the SP volatility at times! It is undoubtedly a challenge, but with upside potential like this share has, I guess it was never going to be easy!

Maybe you should look upon it as rather like running a marathon - many people hit 'the wall' but, when they cross the finishing line, they invariably say it was worth it!

If you have faith in BBBS, Gramacho, Sanddunes etc. (as I do) you simply have to look upon the current SP as more of a blip than anything else. And if you can hold on until the next 'transformational' RNS and I am sure you will soon be hugely optimistic once again.

GLA, scaramouche


KRG Firms Start Process to Reclaim Costs

Copyright © 2011 Energy Intelligence Group, Inc. (click for details)
Tuesday, April 12, 2011
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Companies producing oil in the Kurdistan region of northern Iraq on Monday submitted invoices detailing past costs to the Kurdistan Regional Government (KRG), which will forward them to Baghdad, an industry source tells International Oil Daily. If the federal authorities approve the expenses set out in the invoices, it could pave the way for KRG producers to be compensated for their capital costs.

This step came the day after the KRG submitted its first “oil-export statement” to the federal finance ministry for over 5 million barrels of oil delivered to Iraq’s State Oil Marketing Organization (Somo) since exports from the region resumed in February. KRG Prime Minister Barham Salih said in a statement on Sunday that “the KRG expects to receive from Baghdad its first payment for the Kurdistan region contractors, as previously agreed with Prime Minister [Nouri al-] Maliki.”

Salih may be disappointed. Iraq's deputy prime minister for energy, Hussein al-Shahristani, reiterated last week that companies contracted by the KRG “will not be paid any profit, whether in profit oil or in any other form of compensation,” unless their contracts “are submitted to the government of Iraq, and the government accepts them, modifies them, rejects them -- whatever the decision is made to them: Only then can the amended contracts be the responsibility of the government of Iraq.”

With invoices submitted, however, payment for past costs now seems feasible, at least. Al-Shahristani said last week that the invoices will be checked first by the oil ministry; if they are deemed reasonable, “they will be accepted and the Ministry of Oil will inform the Ministry of Finance to pay the capital costs of those companies” (IOD Apr.7,p3).

Al-Shahristani also said export flows from the region had risen to 115,000 barrels per day. Of that, just over half is coming from Norwegian DNO’s Tawke field, with the rest from Chinese Sinopec and Turkish Genel Enerji’s Taq Taq field.

The KRG’s action on invoices comes as the regional authority is growing increasingly edgy about supplying oil for export through Iraq's main northern pipeline from Kirkuk to the Turkish Mediterranean port of Ceyhan pipeline absent any payment to producers, International Oil Daily is told. Sources suggest a production halt could accompany the failure to agree some form of payment relatively quickly. With the authorities in Baghdad expected to take some time to review invoices, the KRG may press for a one-off advance payment while this process unfolds.

KRG producer Gulf Keystone, meanwhile, said on Monday that it suffered a net loss of $26 million last year. The UK firm's main holdings are in the Kurdistan region, where production from the Shaikan Block, in the form of an extended well test at the Shaikan-1 well, started in September. In February, a second well, Shaikan-3, was tied in, theoretically allowing for production of 20,000 b/d, although facilities are designed for 10,000 b/d.

Shaikan has supplied oil to the local market, with some 50,000 bbl sold in total so far this year, and Gulf Keystone is awaiting approval for further sales from the KRG, as well as the go-ahead to upgrade the Shaikan facilities, Finance Director Ewan Ainsworth says. In the absence of an offtake agreement, production has halted. Whether future sales will serve the domestic market or be exported has still to be decided.

Keystone is also involved in the Akri Bijeel Block with Hungarian operator Mol, and in the Ber Bahr Block with operator Genel

Gulf Keystone PetroleumSPECULATIVE BUY 11/04/2011 Ben Jaglom
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Kurdistan-focused oil explorer Gulf Keystone Petroleum (GKP) has announced a paring of losses for the year to December as its efforts in Iraq continued.

The AIM 100-quoted company reported a paring of pre-tax losses from $96.3m to $26.8 million, also paring the loss per share from 22.8¢ to 4.17¢ in a year in which a substantial year-end cash position of $201m (2009: $19.15m) was declared after raising a total of $364m through the year.

There were a number of interesting developments over the year for Gulf at its operations at the Shaikan, Akri-Bijeel and Sheikh Adi Blocks, carrying out what Texan chairman and chief executive Todd Kozel describes as the 'most aggressive of any company active in the Kurdistan region of Iraq today.'

In an interview with Growth Company Investor chief operating officer John Gerstenlauer remarked that the year had seen a 'very significant reduction' in the total losses over the year adding that the money raised will be used to fund further work across its blocks.

Regarding the situation in Iraq Gerstanlauer cautioned that the company 'stay out of the politics of the region' but added that 'last year was a much easier year to operate in Iraq which was itself a much better year than the year before.' In its full-year results Kozel opined that Gulf Keystone 'understand that we are guests in the Kurdistan region of Iraq' something that he argued 'is a mindset that not only differentiates us from many others' but 'continues to serve us well as we have created a strong, lasting and mutually rewarding partnership with our hosts.'

A heavily traded and highly liquid stock, it has been an exciting year for Gulf. An area with its own cultural identity and language Kurdistan remains the most stable region of Iraq and the prospects for Gulf Keystone look strong, though of course bearing in mind recent turmoil in the Middle East as with many companies in the area its long-term future is certainly not guaranteed.

Recommended by Growth Company Investor as a speculative buy last month at 159p after upgrading from our hold rating the shares have gained three pence, currently trading at 162p. We retain our speculative buy rating.


Q&A: Adnan Janabi

Adnan Janabi, the head of Parliament's oil and energy committee

By BEN LANDO of Iraq Oil Report
Published April 12, 2011

As the head of Parliament’s new Oil and Energy Committee, Adnan Janabi is taking responsibility for pushing forward the long-delayed legislation that will govern Iraq’s oil sector.

Before the 2010 national election, Janabi was mentioned as a possible candidate for oil minister. He was an early player in the post-2003 Iraqi government formation process, serving as a minister of state during Ayad Allawi's tenure as prime minister.

But Prime Minister Nouri al-Maliki was able to hang onto power, and Janabi, a top member of Allawi's Iraqiya List, was temporarily disqualified from government by the controversial de-Baathification commission.

That ruling was eventually tossed out. After months of political bargaining, Iraqiya became a strong opposition group within Maliki's governing coalition, and Janabi took the helm of the parliamentary committee that will help steer Iraq’s oil sector.

Janabi, 71, started his career as an oil journalist in 1964 and spent the next 40 years in various roles in the Iraqi oil sector – working for the national oil company, and as an attaché to OPEC, the World Bank and the International Monetary Fund.

The committee he now leads, Janabi said, will be a stark contrast to the previous Parliament’s Oil and Gas Committee, which was hamstrung(To destroy or hinder the efficiency of; frustrate:) by political dynamics that marginalized the role of the legislature. Very few laws made it to Parliament in the first place, and even fewer were passed.

Janabi and his committee have a lot of backlogged work to get through. Janabi said he will pursue all major pieces oil-related legislation – laws to provide a framework for the management of Iraq’s hydrocarbons, to determine revenue sharing, to reorganize the Ministry of Oil, and to reconstitute the Iraqi National Oil Company. (INOC is his first priority, he said.)

Even without such legislation, the oil sector has developed rapidly. Janabi’s challenge is to balance his committee’s responsibility to provide a clear legal structure for the oil sector with the political realities that have evolved in a climate of legal ambiguity.

Ben Lando: What proposed laws or regulations do you personally feel are the most important priority for the Oil and Energy Committee in Parliament?

Adnan Janabi: There are two sets of legal frameworks that I envisage as related to each other. First, the hydrocarbons framework – including the Oil & Gas Law, INOC Law and the Ministry of Oil Reform Law. The Second framework is (for) the revenue sharing – including the Revenue Sharing Law, the Monitoring Commissions law for Revenue Distribution and the Future Fund law.

BL: Why are these more important than other laws?

AJ: Simply because they help define the legal structure, roles and responsibilities of regulator and regulated bodies while professionally deciding the management of the oil and gas industry and the commercial practice at federal levels. This is in addition to the need for confidence in distributing federal revenues fairly amongst all Iraqis and in the most sustainable manner, without jeopardizing the rights of future generations of our country. It’s about time to have professional and constitutional institutions in place and be held accountable.

BL: What would be the legislation which, perhaps we could call, the second and third phases of priority for the committee?

AJ: One would wish to act in normal circumstances and talk priorities, but we all have witnessed the challenges that the previous parliament had to face and deal with. Previously, all MPs had to endure the dilemma being hostage to secure consensus on what is known as “package deal.” We at the current committee are now working to look into all pending legislation to re-activate in parallel. We started with the least sensitive politically, yet economically vital – the reform of the downstream (refining) investment law. And we have delivered the 1st reading of the INOC Law last week, and we are in the process of preparing for the Oil & Gas law after consulting with all key parties and experts within the government institutions and outside.

BL: What are the timelines and deadlines you are setting specifically for the laws?

AJ: We would love to have all pending laws done yesterday, but practically speaking, we will do our best to legislate all laws sometime this year, provided that the political parties cooperate sensibly and responsibly, in line with their agreement before formation of the government last year.

BL: How will the committee, and you as the chairman, balance what appear to be competing interests, for example of the nationalists who are skeptical of foreign oil companies, members of the prime minister's party who support his prerogatives, and the Kurds which favor decentralized autonomy on energy matters?

AJ: It is a matter of perception. A perception that should be based on what’s constitutionally right and in the national interest, not personal preference. I strongly believe that it is the responsibility of ALL to act and talk constitutionally, while avoiding what one does or doesn’t like.

The present state of Iraq is defined in the constitution as a Federal State that encourages market economy, foreign participation and private sector investment. However, the shape of the federal regime is yet to be decided through defining the level of decentralization in the relevant laws. There are over 55 laws awaiting to be legislated since 2006, to paint the final image of the state of Iraq. Any further delay of that will drastically affect the progress of the state, while feeding wrong perception to the public.

As to foreign oil companies, we feel confident in dealing with them on a commercial basis. We need their know-how and finance and they need our oil and gas.

BL: What do you feel is the purpose or role of the committee?

AJ: To focus on expediting a smooth passage of pending legislations, reform unconstitutional and unpractical laws, and monitor the practice of the executive authorities at federal and regional levels.

BL: In the previous Parliament, the predecessor Oil and Gas Committee didn't pass many laws. Why is this?

AJ: Too many political interventions, beside an unjustified clash between the executive and legislative bodies, that led to hindering the passage of over 55 laws; also crippling the progress of key committees, and not only the Oil & Energy Committee. This eventually rendered all parliamentarian committees ineffective or paralyzed.

BL: How and why will your committee differ?

AJ: This committee and other ones are different. This parliament is a result of an open-list election, hence all elected MPs are accountable to deliver to their constituents.

BL: Previously, it seemed that the committee was taking orders from the Cabinet, only willing to take up legislation after there was a political compromise. And when there were concerns, the Parliament didn't legislate changes to the draft laws, but instead sent it back to the Cabinet. Will this be the same modus operandi for your committee?

AJ: As mentioned, this time is different, as all MPs are willing to demonstrate their best to their electorates.

Also, one should take into consideration the current status of volatile region spreading from north Africa, to the Arabian peninsula and as far as to Afghanistan. The world is witnessing a new social uprising calling for radical change, that deserves to be addressed and acknowledged by everyone in politics. Luckily, in Iraq, we are few steps ahead of other neighbors, as we managed to move from the phase of regime change to regime making, even though the latter phase has been taking way too long to stabilize due to challenging political dynamics and interventions.

BL: From your chair as head of this committee, explain your interpretation of what Iraqi law says about governing the oil sector?

AJ: As a chair of this parliamentarian committee and citizen of Iraq, I have to abide by the constitutional spelling of Articles 111 and 112.

BL: There have been many concerns raised, by a broad variety of Iraqis inside and outside Iraq, about many of the contracts signed in the country over the past five years. I would like to ask you about these in their separate categories. First, do you feel that Parliament needs to have more involvement in the contracting process? Why/why not, philosophically and legally?

AJ: The general understanding of the previous parliament, and the present Committee is that previous legislation is still considered valid until it’s amended. Therefore, each upstream contract should pass as law to comply with Law 97 of 1967.
However, now the contracts have been signed and heavy investments have already been put in place while Iraq is desperate for revenue to proceed on reconstruction; the parliament can play a positive role in helping to facilitate a smooth cooperation between all parties concerned.

However, we still believe that these contracts should be visited by the representative of the people to assess, in order to sustain or revise if needs be. Of course, once the oil and gas law is in place together with the relevant institutions such as INOC and Oil & Gas Federal Council, the latter could undertake the task of assessing the upstream deals across the country.

BL: Do you believe the Basra Gas Company joint venture with Royal Dutch Shell needs to be approved by Parliament?

AJ: We have officially requested a copy of the contract to look into to the shape, terms and conditions of this Joint Venture. Full transparency between the Council of Ministers and the Council of Representatives is a must and not an option, prior proceeding on any strategic initiative. Also, and as mentioned, this parliament is different from the previous one. There is more readiness to cooperate.

BL: What about the contracts signed by the Iraqi Ministry of Oil in the three bidding rounds, or with CNPC for Ahdab? Should they be reviewed, as some have requested, or receive some approval?

AJ: The situation for the 3rd licensing round and Ahdab contract share the same standing of the 1st and 2nd licensing rounds that I mentioned earlier.

BL: The Kurdistan Regional Government (KRG) has signed dozens of production sharing contracts with foreign oil firms. Does Parliament need to review and/or approve these deals?

AJ: The recent agreement between the federal government in Baghdad and the KRG earlier this year will govern the standings and proceedings of these contracts. This was agreed between federal Prime Minister Maliki and KRG Prime Minister Salih.
BL: Are there any policies, or laws, that you feel need to be debated and implemented that are currently not being discussed?

AJ: Yes, there are many, but Iraq is most desperate for a Constitutional Federal Court to be in place; without it, our judicial system is still shaking on a lethal vacuum.


12 Apr 2011

Iraqi parliament need to issue better laws: source

By Safah Khalaf

Erbil - A Deputy of the state of law coalition in the parliament stressed that there are laws that are more important than those proposed on the parliament agenda , in the time AL-Iraqiya coalition deputy confirmed the need to cancel the laws of the dissolved Revolution Command Council , the civil Governor Paul Bremer and issue new laws and legislation.

MP, Hassan Sinead told Hurra TV channel that "there are laws that are more important than the laws proposed to the parliament agenda, therefore those laws must be given a priority in approval."

While MP Haider al-Mulla said, "the laws of the dissolved Revolution Command Council and the civil governor Paul Bremer can not be used."

"There must be new laws that must be taken into account to cope with the new changes in the country."
© AK News 2011


The cretaceous zones in GKP and Akri Bijeel are highly fractured and cause hole stability problems, it could be that the folding is not as severe in the Artush block. Better to ask Gramacho or BBBS though
Cheers blacky,

maybe you could ask them as they are unlikely to respond to me.

No change on trading range in my mind. 151 - 166.25

Can't see it breaking 166/167 without news or rumour and it has a hurdle at 161.50 to get there.

On the support side, 150/151 may be tested again, but again I think that it would take bad news or rumour to break that.

The sp is awaiting news and the longer it takes the more likelyhood that lethargy will put pressure on the support.

On the plus side, we closed yesterday above all suport lines that I mentioned in yesterdays am post.

Is this as simple as a free apraissal as the Atrush well is at the edge of Shaikan and if so what are the implications to how many more billions of barrels GKP have at Shaikan.
Any coincicdence that Sandunes only a few days back was saying SA-1 was filled to spill and I believe BBBS also hinitng a few days ago that both SA-1 and Shaikan filled to spill....exciting times..

Kuwait targets Iraqi crude
Published April 14, 2011

Kuwait will attempt to seize Iraqi oil assets abroad when international legal protections end on June 30 – a move that could upset fragile diplomatic talks and create problems for any international oil companies (IOCs) that are paid in crude.

According to its lawyer, Kuwait Airways will seek to enforce a 2006 English Supreme Court ruling against Iraqi Airways, for stealing $1.2 billion worth of equipment during the first Gulf War, including 10 commercial aircraft and spare parts.
Iraq’s assets are currently shielded from such claims. The protections provided by both the UN and the US, however, will be gone by July.

"From the first of July, it's open season," said Christopher Gooding, a partner with the British-Canadian law firm Fasken Martineau in London, which represents Kuwait Airways. "After that, we can enforce against any assets, including oil tankers and oil assets."

Iraq has signed 11 contracts with the world's largest IOCs, such as ExxonMobil, Royal Dutch Shell, BP and Italy's Eni, along with state companies from Turkey, China and Russia, to raise Iraq’s oil production capacity to 13.5 million barrels per day (bpd).

Their contracts allow them to get paid partly “in kind,” with crude oil. But soon those oil shipments could become targets.

"If it's an asset of Iraq, it comes into a jurisdiction that we can enforce our judgments, then we'll arrest" the assets, Gooding said. "This includes oil tankers, oil cargoes, proceeds, trading – everything, basically."
When asked what this means for IOCs that are paid in kind, Gooding said, "Be careful…. I don't think it can be much better explained than 'be careful.' It's open season."

Several officials speaking on background said that UN immunity will almost certainly end as scheduled.

The U.S. could extend its legal protections further, as it did last May. But neither the U.S. Embassy in Baghdad nor the State Department in Washington has taken visible steps to mitigate the impending legal crisis. Neither would provide comments for this article.
Officials familiar with Kuwait-Iraq relations characterized the threats from Kuwait Airlines as legally potent, despite their dramatic phrasing.

"It would be complicated, it would be difficult, but in theory, based on jurisdiction, it's possible," said one official who, like others, spoke on the condition of anonymity.

IOC officials, none of whom would comment on the record, said they were surprised by the legal threats, but would wait to see how the situation develops before taking any action in response.

Since 2003, a UN-mandated body has monitored Iraq's oil revenues to combat graft and ensure that compensation is paid to Kuwait for damage and crimes perpetrated during the Saddam Hussein-era invasion. Oil money flows into the Development Fund for Iraq (DFI), an account at the Federal Reserve Bank of New York, and five percent is set aside for restitution, while the rest of the funds become available to the Iraqi treasury.

This mechanism will soon sunset, in tandem with the removal of Iraq from Chapter 7 of the UN Charter. Kuwait has opposed the lifting of these sanctions, for fear that Iraq will stop making the regular payments that the DFI currently guarantees.
Iraqi and Kuwaiti officials have been meeting regularly over the past years to come to an agreement that would finalize both Iraq’s outstanding debt – currently pegged at around $20 billion – and a mechanism for paying the compensation. Those negotiations also include other issues, such as maritime and land borders, and the assets that fall along the disputed boundary, particularly oil fields.

If Iraq loses the immunity before a deal is reached, Kuwait could make a claim to all of the money it believes it is owed.


Taxation of Foreign Suppliers in Iraq

Posted on 11 April 2011. Tags: Anthony Raftopol, Iraq Law Alliance

Pages: 1 2 3 4

By Anthony V Raftopol.

This article was originally edited by, and first published on, www.internationallawoffice.com – the Official Online Media Partner to the International Bar Association, and International Online Media Partner to the Association of Corporate Counsel, and European Online Media Partner to the European Company Lawyers Association. Register for a free subscription at www.internationallawoffice.com/subscribe.cfm


Numerous companies located outside Iraq, but providing goods and services into the country (either on a single project basis or through a consistent stream of business), are grappling with the idea that Iraq may tax at least some of their business profits. This is true even where such companies are not registered in Iraq or do not maintain a local office or local employees.

The Iraqi authorities are managing this by applying a tax to the value of the supply contract upon entry of goods into the country, as a kind of guarantee deposit. This is released only once the foreign supplier has submitted a tax clearance letter, issued by the General Commission for Taxes, confirming settlement of its tax liability on the supply contract in question.

The fact that Iraq permits the taxation of business profits of foreign-registered entities should be of no surprise. This practice is employed by many countries, provided that a sufficiently close nexus exists between the taxing jurisdiction and the foreign entity. In developed countries, especially, this ‘nexus’ is crystallised under the ‘permanent establishment’ analysis, subject to numerous tax treaties and the Organisation for Economic Cooperation and Development (OECD) Model Tax Convention.

However, the Iraqi authorities have adopted a much simpler formula for determining which foreign suppliers should be taxed, by considering whether suppliers are doing business in Iraq or doing business with Iraq. Given the significant distinctions between the approach under the OECD model and that adopted by Iraq, companies supplying goods and services into the country should familiarise themselves with the Iraqi approach in order to limit their tax exposure while doing business.

Permanent establishment under the OECD Convention

The guidelines adopted by many countries under tax treaties modelled after the OECD Convention revolve around whether a subject business has created a permanent establishment within a country’s jurisdiction. Under the OECD Convention, the existence of a permanent establishment must be accompanied by the following factors:

◦There must be a link between the place of business and a specific geographic point, as well as a degree of permanence with respect to the taxpayer;
◦The company must have a place of business; and
◦The business of the enterprise must be carried out wholly or partially at the fixed place.

Accordingly, a permanent establishment must comprise a fixed and commercially coherent space which the foreign enterprise uses to carry out its business. Mere presence is not enough as that does not necessarily translate into doing business within the space. The facilities need not be used exclusively by the foreign enterprise or for the business subject to taxation. Rather, the facilities must belong to the foreign enterprise and not to another unrelated entity.

Many treaties explicitly exclude from the definition of ‘permanent establishment’ places where certain activities are taking place. Generally, these exclusions apply to activities conducted at the fixed place of business, such as activities related to the storage, display or delivery of goods, merchandise or other so-called ‘preparatory or auxiliary activities’, as well as purchasing or information-gathering activities.

Taxation of foreign suppliers

The authority of the General Commission for Taxes to tax an entity located outside Iraq is set forth in Article 21(7) of Law 113/1982, which establishes the principle that non-residents may be taxed in cases where:

“the trade, commercial business, vocations or any other transaction of a commercial nature from which the gains and profits have arisen is carried on in Iraq. The financial authority shall differentiate between trading in and with Iraq.” (emphasis added)

Accordingly, Iraq law distinguishes between ‘doing business in Iraq’ and ‘doing business with Iraq’, and the tax regulations set forth the principle that non-residents are not liable for tax unless trade, commercial business, the provision of services or any other transaction of a commercial nature are carried on in Iraq.

Under Tax Instruction 2/2008, the Iraqi tax administration has attempted to delineate further the distinction between business in Iraq versus business with Iraq. For example, under Article 2, trading with Iraq will be assumed (and Iraq tax liability will not apply) where the supplier has its place of business outside Iraq, the contract was signed outside Iraq and all legal and handling activities (eg, issuing letters of credit or shipping, paper handling, customs and similar processes) are performed by Iraq-registered entities. Trading with Iraq will also be assumed where all of the services and expert activities are performed and paid for outside Iraq.

However, a foreign supplier will be deemed to be doing business in Iraq (and will be subject to tax, irrespective of whether such services were performed under the same or a separate contract) to the degree that it provides complementary services inside Iraq, including installation, supervision, maintenance and engineering works.

Under this analysis, significant tax savings under any particular supply arrangement may be made by relocating outside Iraq the most important actions to be taken by the foreign supplier or subcontracting those actions to an Iraqi party.

Significantly, tax savings could ensue if such foreign suppliers were to use two separate contracts with the Iraqi beneficiary: one for services performed outside Iraq and the other for services performed within the country.


This model of taxation, which is centred around the concept of doing business in Iraq, appears to have a broader and more simplified application than the ‘permanent establishment’ criterion adopted by the OECD Convention. The OECD Convention focuses on the location and the nature of the place of business, which requires a somewhat sophisticated understanding of the business itself in order to determine whether a permanent establishment exists. On the other hand, the Iraqi authorities appear to be more interested in the location of the most important actions taken by the foreign supplier. So long as many of the key actions taken to conduct business are located outside Iraq or are assigned to Iraq-registered actors, the business profits of the foreign supplier are considered as doing business with Iraq and are not otherwise subject to tax. No further analysis of the business itself need be undertaken.

The OECD Convention specifically excludes the taxation of preparatory or auxiliary services conducted within a particular tax jurisdiction (as this would not necessarily lead to a conclusion that a place of business has been established), whereas the same services would lead to taxation in Iraq for the foreign supplier, as this would be considered as doing business in Iraq (the actions themselves are being performed in Iraq, regardless of their nature). Thus, under Iraqi tax law, there may be a signficant economic connection between a business and Iraq; but if the supplier performs its most important operations from outside the country or by using in-country agents, it is unlikely to incur income tax liability in Iraq.
For further information on this topic please contact Anthony V Raftopol at Iraq Law Alliance PLLC by telephone (+964 7 503 355 079), fax (+20 2 760 4593) or email (anthony.raftopol@iqilaw.com).

The increased recovery factor from 16.6% to 21.3% was reported by DNO fairly recently. It is based on recovery of 306 million barrels from the 1439 million barrels of OIP updated estimate provided by BF.

What is perhaps more interesting though is that DNO say that their own estimates of recoverable oil are actually 387 million barrels of the 1439 million barrels figure using “more proactive reservoir management measures”. This actually amounts to a Recovery Factor of 26.9%.

It all goes to show that it is not only possible for the OIP figures to be revised upwards, but for the Recovery Factor to be increased too.

Worth looking out for this with Shaikan too (and hopefully very soon Sheikh Adi) as an increased recovery factor from say 30% to 33% would have the same effect on NAV 'Valuations' as increasing those OIP figures we often focus on by 10%.
We could really do with getting some idea of those RFs from the GKP management via RNS, as at present we have only JG's slightly speculative estimate of a "33% industry average" to go on.

GLA, scaramouche



Will $84 costs underpin the oil price?
Where is the last of the cheap onshore oil?
Will the Iraqi govt reach agreements with the KRG?
Will Kurdistan eventually go it alone?

I'm no political expert on Iraq / Kurdistan and the contracts, that's for the more knowledgeable posters here, but I read something in a book about Kurdistan and future independence (a Jim Rogers book "Hot Commodities' where he predicts that some time Iraq will break up into three separate states.

This got me thinking, and I think that the Kurds would more like to manage their own oil industry, rather than the revenues. If they were to establish sovereignty, they would need to build up a record over time to prove they are effective at exercising policies should they seek independence under international law.
So if they eventually got independence, revenue sharing enshrined in federal law and the constitution would the agreements become mute?
Why would an independent Kurdistan agree to transfer oil and gas revenues to a neighbouring state, Iraq?
I've often thought that Hussain al-Shahristani wanted a Nationally controlled oil industry, much like Sadaam exercised. Something Kurdistan will forever stand against. Let's hope that the new oil minister has better 'bridge-building, save everybody's face' skills.

I fear perhaps that DNO and Sinopec will get paid costs, and will get 'profit oil' payments, but the PSC ratification question may remain for a while yet. --------------------------------------------------------------------------------

mr reliable 2

GKP we believe is heavily traded by ii's we think. Private investors follow suite.

Their are a number of things that a trader can do:

1)Sell half your holding for a target price eg £1.80
a)Either sell when you see the price hit this point or place a limit order with your broker for your target price e.g. £1.80.
2)If the SP continues north (long term holders nightmare) you still have half your holdings
3)If the SP retraces to say £1.60 buy the holding you sold keep the profits to live off if required.
4)The thing you must be carefull of is becoming a distressed seller ie selling on a big retrace like £1.20 that is the biggest problem you face IMVHO.

These are a few ideas it may be best to dicuss this with family or someone you trust. I am a poster on a bulletin board so any ideas you see should be thought out carefully.

Personally i am trying to get cash towards a decent pension which i do not have so am staying in GKP long term. Whilst i am confident with the investment this is a very stressfull share to hold. It is very hard to work out exacly where we stand. Oil is no problem politics - is a different matter.

Due to the huge amount invested by the USA et al(and others) money and lives its hard to see GKP failing IMVHO.

It is very hard to work out when GKP will reach its potential if it ever does.

PMDParty think carefully mate!!

In response to my post last night someone has commented 'Perhaps they would rather bring a NOC or IOC on board'.

If the back-in rights are awarded to a third party by the KRG, my understanding is that GKP would still retain operatorship status at Shaikan.

If GKP were successful in attaining the back in rights - then a potential purchaser may find making a bid for GKP that bit more attractive as less parties involved in the PSC to negotiate + make forward plans with.
Would GKP be offered 'first refusal' if they could match the monetary value of third party offers for the back in rights?.

There has been a train of thought aired recently that a/some Institutional Investor(s) are currently selling down all, or part of their GKP holding.

The law of Supply + Demand and witnessing the declining share price, despite the recent RNS upgrade of Oil in Place (OIP), would support this prognosis.(A prediction of the probable course and outcome of a disease.

If the above is true, why would a Institutional Investor have decided now was the right time to sell?

There may be a multitude of reasons eg. to cover other losses in the II’s portfolio, better perceived investment prospects in other shares etc.
I raise another possible reason on this discussion board for open debate:

What if the Institutional Investor had got wind of another imminent placing (Say @ £1.50) that they may have been ‘sounded out’ if they would partake in it? Would then selling a percentage of the II’s current holding down to a price of say £1.55 seem a logical action?

Ewen Ainsworth was recently quoted by Proactive Investors as saying that GKP may consider building a pipeline spur to the main Kirkuk-Ceyhan pipeline. He may find that project/bank financing is too time consuming and too much security over other assets is required by the potential lender – so a share placing could be deemed preferable and a quicker method to get the project started. The KRG appear very keen to ramp up exports quickly from Kurdistan.

And/or another possibility is that GKP have been informed of the KRG’s intention to award back-in-rights for Shaikan to a nominated third party and have asked instead to have ‘first refusal’ if GKP can match the price that the third party has offered to pay.

I have fully diluted Shaikan ownership percentages as:
51% - GKPI
13.6% - MOL
3.4% -TKI
12% - Third party back in rights
20% - KRG

If GKP went for the 3rd party back in rights, they would have (51% + 3.4% + 12%) 66.4%.
Is it out of the realms of possibility GKP could offer to buy the KRG’s 20%? (51% + 3.4% + 12% + 20%) 86.4%. After all, the KRG still have the 40% infrastructure support tax to look forward to. Wouldn’t the above %’s be worth the dilution of a further fund raising if the ‘price was right?’.

The above is just raised on this discussion board for debate – as a potential explanation why a increase of a mean Oil in Place (OIP) of 4.2 billion barrels by DGA to mean OIP of 7.5 billion barrels can be treated by the market so lukewarmly.


This theory certainly makes sense. Todd may have thrown Shareholders a bone or two with Shaikan 2 and OIP upgrades prior to any placing news. Certain Directors would have known what what coming hence there sells at 185 with options to buy back (@1.75) at 2.75, 3.25 and 3.75 respectively.

Whilst nobody like dilution, in GKP's case, this has proven to be a positive step on every occasion. Let the game commence Todd June is approaching FAST!!!

Dear Sir,

I have recently come accross the following article from the KRG website (http://www.krg.org/uploads/documents/KurdistanTimes_2011__01.pdf). On page 4, there is a table with the operators in the region, and who, if anyone, holds the KRG back-in rights to the respective blocks. I note that for GKP, for the Shaikan block (51% working interest - the second GKP line in the table), it has Korean National Oil Company as the holder of the KRG back in interest.

Would you be able to confirm this?

I also see there are some mistakes in the table, as for the first row with GKP it has 40% interest (I assume this is Sheikh Adi), instead of 80%.

I would appreciate some comment regarding KNOC if possible.

Further, the deadline for the back in rights to be allocated is 30th June 2011 - do we expect an announcement regarding the KNOC interest by this date?

Thank You

And we never knew where those 78 million shares from the October placing went - perhaps your extensive research has just given us the answer.

I am not going to get into the personality side of this debate.

I continue to believe that Mikey posts a great deal of useful information, which others (including myself) appreciate. It is all too easy to criticise someone for perhaps getting a bit too immersed in the detail sometimes, and missing some salient point, and I am not going to support anyone who spends a lot of their time nit-picking his contributions.

As I said earlier today, I value considered viewpoints from Technical Analysts like STM, Jackozy and others, and the Fundamental research provided by people like Mikey. We all have a part to play in helping others understand the true value of this share both in the short-term and long-term, so I would ask you simply to desist from picking holes in anyone repeatedly... as you often done in relation to some of my posts as well.

My apologies to Mikey if I sounded a bit harsh - I have just been thinking about those 'missing' 78 million shares for some time, and the penny was starting to drop. Your info was invaluable in that respect.


The 17.5" hole on Sheikh Adi-1 eventually reached what was anticipated to be just above the Jurassic and casing was set. Upon drilling out of the casing into what was expected to be the first of the primary target intervals it was discovered that the borehole had crossed a reverse fault and approximately *400 metres of Cretaceous interval still remained to be drilled before reaching the Jurassic*.

Drilling operations have *finally reached the Jurassic* and well operations are on- going. At 7 April 2011 the well was at a depth of 2,685 metres--------------------------------------------------------------
Above is from the 11th April RNS.

It shows the Drill bit is at 2,685mtrs, and is above the Jurrasic, AFTER drilling through the 400mtrs of additional Cretacious after they found that they had gone on the other side of a 400mtr slip faultThat shows that GKP expected the Jurrasic to be just below 2,285mtrs where they set the 17.5" Casing


SA1 and SH2 Completion Dates Fordian 2

Some thoughts on completion dates for two wells based on current progress:

Spud date = 6th Aug
7th April = 2,685m (after 244 days)
Average/day = 11m
400m additional remaining cretaceous to drill. Estimated target depth = 5,500m
Estimated completion date based on current progress = 19 December, 2011 (500 days total)

Spud date = 1st December
7 April = 1,975m (after 127 days)
Average/day = 15.5m
Target depth = 4,994m
Estimated completion date based on current progress = 19th October, 2011 (322 days total)

Note: I've not taken testing periods into account.

In summary - the cretaceous was always the difficult part and once GKP are through that, the drill rate should increase significantly. SA1 should be through the 'surprise' cretaceous by early May, by which time we should soon be flow testing the Jurassic once again - significantly increasing the OIP if we are lucky.



Dear Mr X,

Thank you for your email.

In line with Gulf Keystone’s latest Investor Presentation (http://www.gulfkeystone.co.uk/uploads/gkp_investor_presentation-jan11.pdf), Gulf Keystone’s (GKPI) working interests in the four blocks in Kurdistan, Iraq are as follows: (1) Shaikan – 75% (GKPI – Operator); (2) Sheikh Adi – 80% (GKPI – Operator); (3) Ber Bahr – 40% (Genel – Operator); (4) Akri Bijeel – 20% (MOL – Operator).

The Kurdistan Regional Government (KRG) is a party to the four Production Sharing Contracts (PSCs) signed by Gulf Keystone in relation to its assets in Kurdistan, Iraq. According to the PSCs related to the Shaikan block and the Akri-Bijeel block, the KRG has a right to exercise the so called Option of Third Party Participation, i.e. to nominate the Third Party Participant and award the Third Party Interest.

In addition, the KRG has back-in rights in both the Shaikan block and the Akri-Bejeel block. Should the KRG exercise these rights, it is anticipated that the Company’s interest in the Shaikan and Akri-Bijeel blocks will be 51% and 12.8% respectively. Similarly, the Company anticipates that our past costs in relation to the Third Party Participation provision will be reimbursed to Gulf Keystone by the Third Party Participant. For the avoidance of doubt, there are no back-in or Third Party Participation rights applicable to the Ber Bahr and Sheikh Adi blocks.

As you rightly point out in your email, the Company’s regulatory announcement (RNS) of 9th August 2010 (available on the Company’s website) informed the market that all parties to the PSCs related to the Shaikan block and the Akri-Bijeel block had agreed to extend the period during which the KRG may exercise the Option of Third Party Participation until 30th June 2011. After the KRG has exercised its right by having nominated the Third Party Participant and awarded the Third Party Interest in the Shaikan and Akri-Bijeel PSCs and the respective PSCs have been amended accordingly, the Company will issue an appropriate announcement.

In the meanwhile, Gulf Keystone remains committed to informing our shareholders with any material information via appropriate Company’s RNS as and when such information becomes available.


So, could get from that, that KNOC are involved - but until the PSC is ammended they dont have to announce?

GKP are listed on the Aims Market.

The Aim's Market is a loosely regulated Market, in which the Big Guys (Institutions) can push the little guys around.
The Institutions can do what they want, and do it hidden in such a way, that even Charts will not see them in action.

Between Nov 31st and 1st March, 82,000,000 more shares where acquired by Institutions than where sold.
**Did the charts see that happen**

Why on earth anyone expects the SP to rise when Institutions Buy, does not realise what the Institutions can do with a tiny stock like GKP.

The Buy and Sell ratio's you see are wrong, because of how the AT trades are reported.
The O trade Buy & Sell ratios are not sepperated.
Late reported O trades could be Sells or Buys.

Aim's is anything goes, as far as Selling or Buying shares by Institutions.
They can hold a stock at a level and sell shares.
They can cause a stock to fall to accumulate

Plus on top of all that, GKP is registered in Bermuda, and we do not get notified of increases or decreases in Major Shareholdings.

It all adds up to plain facts, non of us knows what the heck is happening, neither L2 ers, or Charters, its all gut feeling.

My gut says the Institutions have suppressed two good RNS's, and are causing the fall to acquire shares.

Until you all see it in black and white from the GKP site, or other sites of repute, non of you will believe what I am saying.

I will say this.
If I thought that the fall has been caused by normal selling, then I would have sold everyone of my shares, and bought back cheaper, increasing my holding.


Kurdish oil traders abducted in Mosul
Tuesday, April 19th 2011 2:52 PM

Nineveh, April 19 (AKnews) - An official security source in Nineveh police said Tuesday that three oil traders were abducted in Souk al-Maash area on the east coast of Mosul.

Unknown militants took the oil trades hostage to an unknown destination, said Brigadier-General Mohammed al-Jabbouri, they have asked for a ransom of US$30,000 for their release.

"One of the abducted traders is Kurdish and the other two are Shabaks," al-Jabbouri said.

The Shabaks, the majority of whom identify themselves as ethnically Kurdish, follow an independent religion, related to but distinct from orthodox Islam and Christianity.

Mosul, 405 km north of the Iraqi capital of Baghdad, has been the scene of armed actions since the fall of the former regime. Abductions and killings have become a almost a daily phenomenon.

Reported by Rizan Ahmed



here is a technique used to determine how important is a fewly released fundamental news

Create a table of news dates and analyse the following

1. Volume traded
2. Gaps up or down
3. How large was the gap
4. Auctions during trading and impact after
5. 50% fib rule
6. Total Volume traded before the sp started drifting
7. Reaction at previous support / resistance
8. Largest trades executed and impact on sp

Once you do that on any share, you can easily rank your fundamental news in order of importance and see if they have been priced in increamentally or within a previously released stronger news

You can alsoo assign a weighting to your fundamental news and you can then estimate how much of a coiled spring or lead balloon effect it will have if the news was removed

This is the sort of analysis used in the city especially by sector fund managers and these parameters are set ith a clear plan of what to do if X or W happens

As you can see, the only way to do this is to also use TA with the fundamental news

This is how I use fundamental analysis If I decide to invest in a share for the long-term


FWIW=For What It's Worth
, I too have never doubted that there was at least one major seller at the same time as there might have been one or more substantial buyers, and posted that viewpoint before.

I have mentioned that my research showed that Capital Research had reduced their holding by about 18 million shares since about November 2010, and that Blakeney (who also used to be a major holder) seem to have disappeared from the scene altogether.

Both of these institutions got shares in the 9p placing and each of the cheap placings since, prior to October's placing at 140p per share, so it was perhaps inevitable that they would sell large volumes to reduce their risk exposure during the recent turbulent times.

I have also posted, on Saturda, that PIs have actually accumulated about 30 million shares from the IIs in the last 11 months, rather than the opposite way round. So, I do recognise that many IIs must have been selling.

The question remains as to what will 'Trigger' the buying, given that last week's RNS seems to have so far failed to do the trick!

Still, if there are signs that this 'over-hang' is almost over, and certain IIs selling is ready to stop, that has to be good news. I presume that you see that as one of the triggers for a step upwards to the next trading range - I look forward to also reading STM's viewpoint in due course.

Think about it – Shamaran announces a major oil find on 13 April 2011.


Less than one week later, their Chairman Keith Hill appears on a major business news channel and comments on the Sinopec takeover of Addax Petroleum (another Kurdistan oilie) which happened way back in August 2009, confidently stating that Shamaran too could easily become a T/O target once the oil contract issues are sorted out.

The Chairman mentions that both the Iraqi PM (Maliki) and the Oil Minister(Luaibi) have confirmed that they are keen to resolve the issues between Iraq and Kurdistan saying that “it is in the interests of both parties”. Admittedly, he omits to mention Shahristani but, to be quite honest, he seems fairly relaxed about the whole political situation.

A review of the Sinopec T/O of Addax shows that, when the deal went through in August 2009 (more than 2 Months after the original bid), Sinopec paid $ 7.56 billion (US) for 537 million barrels of oil reserves.

That works out at about $14 per barrel, and it is worth noting that the contractual situation in Kurdistan was much more risky than it is today.

Now, in the interest of balance, it is also worth pointing out that Addax was an established company with extensive oil production, and one that operated not only in Kurdistan, but traditionally safe havens like Nigeria and Gabon as well - seriously, it just goes to show that there are very few truly 'safe' oil exploration areas anymore!

And, more to the point, the Addax takeover does illustrate perfectly that a measly $5 or $6 per barrel (which some of us believe we might receive after the KRG’s 40% infrastructure tax) is hardly an exorbitant sum.... so the Kurdistan contracts can certainly not be regarded as excessively generous.

It is also an established fact that Sinopec was prepared to pay well over the odds for this oil, and we know that the almost insatiable(Impossible to satiate or satisfy:) Far Eastern countries are desperate to acquire energy resources for their fast-growing economies.

What the article does not say though is that the price of oil back in August 2009 was ONLY $70 and had just hit a year high.

With oil now $120 per barrel and the long-term outlook at least $100, it might be reasonable to assume that Sinopec or another oil-hungry Chinese company might offer an even larger sum for every barrel of oil reserves than they paid nearly 2 years ago.

With a share price of 160p and a market cap of only around £1.2 billion, just like Shamaran, GKP could so easily be... the answer to their prayers!

Thanks again,

Takeover & Tax Planning - advice onlookout

Does anyone know the answer to these questions – I’m trying to plan my last year at work

(1) If GKP gets bought outright, does the returned money get taxed
As per CGT (i.e. 18% Tax then 28% at HR threshold)
As Income (i.e. 20% Tax then 40% at HR Threshold)

(2) If (say) the rights to Shaiken get sold on, and GKP continue with the remaining blocks, is the money most likely to be returned as a Dividend? (i.e. 20% Tax then 40% at HR Threshold)

This would be a Capital Gain Not Income, same as if they go down and you make a loss it will be a Capital Loss Not Income.


Author daeyeon
To quote Mr. Hill,

'...spend the hard time and effort to derisk these properties, and I think there is a big list of people who need reserves and they're happy to come in and pay us a premium once we've derisked them and brought them to development stage.'

I like that some entity, after the govt and KRG, will be 'happy to come in and pay a premium'. Also, 'there is a big list of people who need reserves'. There sure is, both NOCs and the likes of Chevron, BP....

Politics eventually gets sorted (will still take time, as most things do in the ME), GKP has the time to prove up as much as possible, somebody comes in and pays a premium, job would be done. Easier said than done, but if you have the patience and believe you have a holding that could ensure retirement, or at least pay off the mortgage, a year or two could very well be worth waiting for.

Even at 4.9B at Shaikan, 2B at AB, after taking into consideration GKP's share of above said at 51% and 12.8% and a recoverable rate at 30%, and $3.60 as the value to GKP (the PSC profit oil could work out at anything above $6, and we have costs to be recovered, and any cash to consider).
We have 821M barrels so far atributed to GKP, x that by $3.60, giving us just shy of $3B, that's 1.835B GBP. Divide that by 762M shares, arriving at an SP of 240p.

Throw in the upside at Shaikan, AB, BB, gas and the soon to be announced SA.

Even with a bid before BB is completed, SA fully appraised, I struggle to find a T/O at less than 8GBP (with politics sorted), even with applying my personal margin of safety.

If payments haven't been made to the likes of DNO, I don't see a T/O approach, but when payments start to be made, I think it'll be game on. A major or NOC won't want to hang about waiting for GKP to prove up the rest imo.
TK and co at GKP seem undisturbed by the political situation, and Keith Hill seems unworried, as he just says things take time to get sorted in the middle east, and I bet he has the 'big list of people' written down on a piece of paper and it's in his back pocket.

ShaMaran Petroleum Corp.

April 19, 2011 16:30 ET

ShaMaran Announces $50.4 Million Private Placement

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 19, 2011) - ShaMaran Petroleum Corp. (TSX VENTURE:SNM) ("ShaMaran" or the "Company") reports that it intends to sell on a non-brokered, private placement basis, an aggregate of up to 56 million common shares of the Company at a price of $0.90 per share to eligible investors that may include insiders for gross proceeds of approximately $50.4 million.

A 4% finder's fee may be payable on a portion of the private placement for subscriptions received from non-insiders. The common shares issued pursuant to the private placement will be subject to a 4 month hold period. Net proceeds of the private placement will be used towards ongoing work programs in Kurdistan and general working capital purposes.

The foregoing private placement is subject to regulatory approval.

About ShaMaran

ShaMaran Petroleum Corp. is a Kurdistan focused oil development and exploration vehicle. It has four projects in the region: the Pulkhana development/appraisal block and the Arbat, Atrush and K42 exploration blocks. These projects are nearby and on trend with existing fields and recent discoveries.

Kurdistan lies within the northern extension of the Zagros Folded Belt. The area is highly underexplored and is currently undergoing a significant exploration and development campaign by over 30 mid to large size international oil companies.

ShaMaran Petroleum is a Canadian oil and gas company listed on the TSX Venture under the symbol "SNM".
On behalf of the Board,

Pradeep Kabra, President and CEO
This press release contains statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as legal and political risk, civil unrest, general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events and management's capacity to execute and implement its future plans. Actual results may differ materially from those projected by management. Further, any forward-looking information is made only as of a certain date and the Company undertakes no obligation to update any forward-looking information or statements to reflect events or circumstances after the date on which such statement is made or reflect the occurrence of unanticipated events, except as may be required by applicable securities laws. New factors emerge from time to time, and it is not possible for management of the Company to predict all of these factors and to assess in advance the impact of each such factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking information.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


Ninety wounded in northern Iraq protests18 Apr 2011 21:50

Source: reuters // Reuters

ARBIL, Iraq, April 18 (Reuters) - At least 90 people were wounded in a second straight day of clashes between protesters and security forces in the northern Iraqi city of Sulaimaniya on Monday, police and medical sources said.

Popular discontent in Iraq's semi-autonomous Kurdish region has been directed at a regional government dominated for decades by two political parties whose former guerrilla armies have been converted into security forces.

Security forces fired shots and used tear gas to try to disperse protesters, wounding 29, while 61 policemen were injured by stones and other objects hurled at them, police and health officials said.

At least 35 people were hurt a day earlier in Sulaimaniya, the region's second largest city and the hub of protests continuing since February.

In the regional capital Arbil, dozens of students tried to rally near a university but were attacked by security forces, a Kurdish lawmaker told Reuters.

"I saw many protesters lying on the ground and being beaten by security forces," Mohammed Kiyani, a Kurdish politician, told Reuters. "When I tried to stop the beating of protesters lying on the ground, police surrounded me. I was beaten and forced into a police vehicle."

Kiyani said he was released after a policeman recognised him as a member of parliament.

Rekawt Hama Rasheed, general director of the health office in Sulaimaniya, said nine protesters were shot.

"The number of security forces treated in the hospital is 61. They were wounded because of the rock throwing," Rasheed said. "There are nine protesters wounded by gunshots, one of them in critical condition, in addition to 20 other protesters wounded by tear gas and batons."

Most of the wounded refused to be admitted to hospital for fear of being arrested, eyewitnesses and hospital sources said.

Kurdistan's president, Masoud Barzani, announced plans last month to enact reforms but demonstrators have said they fall short of their demands.

Iraq has been hit in recent weeks by nationwide protests inspired by uprisings across the Arab world. Demonstrators have demanded better government services and an end to corruption but for the most part have not sought the removal of the national government installed in December after elections in March 2010.

Human rights group Amnesty International said last week that security forces had used excessive force against peaceful protesters in Iraq.


While Willy123 is right that individual broker upgrades do not necessarily lead quickly to movements in the SP, IMHO when there are a good many of them saying much the same thing, it does tend to provide a degree of support or a floor to the price.

With Arbuthnot initiating coverage today, we now have at least EIGHT BROKERS covering GKP, and not just those that have supported GKP for some time.

This is my current understanding of those differing broker views on GKP:

1. Arbuthnot - Initiated with BUY recommendation and TP of 275p (20/4/2011)
2. Daniel Stewart - Retained BUY recommendation and TP of 200p in early April ,prior to massive increase in OIP announced last week. Updated note must surely be due soon!
3. Evolution - Upgraded to ADD (15/4/2011) with TP of 200p.
4. Fox Davies - Retained BUY recommendation (15/4/2011) and increased TP to 275p.
5. Goldman Sachs - No news from them since January/February 2011 when they set a NEUTRAL rating and TP of 234p.
6. Matrix - upgraded to BUY with TP of 190p in early April, prior to massive increase in OIP announced last week.
7. Mirabaud - unchanged BUY recommendation (14/4/2011) and TP kept at 215p.
8. Renaissance Capital - Upgraded to BUY (18/4/2011) and TP of 185p.

The current AVERAGE TP is therefore already 222p.... with Goldman Sachs, Daniel Stewart and Matrix still to review their targets and react to the latest OIP upgraded figures. (Come on GS in particular - we really want to know what you think now!)

Interesting comment too from Arbuthnot today, when they say there is still an upside of 80% from their 279p target, which has been discounted due to Political Risk and the Excalibur claim.
This indicates that their TP would be 500p without those factors, and that they are therefore currently applying about 45% DISCOUNT due to those risks.... Yet they still set a price target of 279p! Goldman were applying a 40% discount in January/February and I misread the Arbuthnot note as saying much the same.

Sooner or later, when the market takes the brakes of the SP, it will start to reflect "what the Brokers say"... and we will have lift off!

Remember too that none of them are applying any value YET to Sheikh Adi!

AIMHO and please DYOR,



Top Kurdish leader offers to resign
Wed Apr 20, 2011 6:43PM

Kurdish regional prime minister Barham Saleh
A top politician in Iraq's Kurdistan region has offered to resign from the party leadership following weeks of anti-government protests in the semi-autonomous region.

Criticizing lack of freedom in the region, Kurdish regional Prime Minister Barham Saleh said on Tuesday that he made the decision after finding the Patriotic Union of Kurdistan unable to control the situation in the region.

"The current leadership of the Patriotic Union of Kurdistan (PUK) is not able to go along with the new situation," Barham Saleh wrote in a letter to Iraqi President Jalal Talabani, who is the secretary general of PUK.

"I am ready to resign from the leadership of the party in order to renew it and the political bureau," Saleh said in his letter, a copy of which was obtained by AFP.

He also urged Kurdistan's ruling parties, the Patriotic Union of Kurdistan (PUK) and the Kurdistan Democratic Party (KDP), to carry out a complete ministerial change to end mass street protests.

"The Patriotic Union of Kurdistan and the Kurdistan Democratic Party must carry out a complete ministerial change and form a technocratic government," he added.

Protesters in Iraqi Kurdistan are calling for an end to official corruption and the resignation of the regional government.

PUK and KDP, the two main parties that have ruled the region for decades, are now accused of nepotism and corruption.

On Tuesday, at least 75 were injured in Iraq's Kurdistan after military forces attacked student protesters near Sulaymaniyah University.

Press TV's correspondent says more than 300 students were also arrested.

Since the beginning of protests in Iraq's Kurdistan region, at least three people have been killed and many others injured during clashes with security forces.



Thursday, April 21, 2011

Iraq's possible exit from Arab League
By Hassan Hanizadeh

The Arab League summit that was scheduled to be held on March 29 in the Iraqi capital of Baghdad was cancelled due to the exertion of influence by Saudi Arabia and some Persian Gulf littoral states.

The Arab League decided on its 2009 summit in Cairo to hold its next summit in Baghdad.

The Iraqi government spent more than USD 400 million to prepare for this important Arab summit.


I wonder if we have been paying enough attention to the implications of the allocation of the back-in rights to Shaikan?
We know that unless there is another postponement, the Shaikan back-in rights have to be allocated by 30th June.It seems to me that the consequences will be significant:

1) If the back-in rights are bought by a western IOC we will immediately know the value the market really places on Shaikan free from the stock market manipulation that we suspect. If the back-in rights are bought by an NOC we may not know the exact price that has been paid to the KRG but we will know that another big oil company is confident that there is limited political risk in Kurdistan.
2) In either event, GKP will immediately be re-rated by the market.

The above will also be obvious to any company considering making a bid for GKP so if I were in the corporate strategy department of an oil major or NOC (and I started my career doing corporate strategy), I would be whispering in my CEO’s ear that May or June would be a good time to launch a bid. Wait any longer and GKP will be much more expensive.

The problem for most would-be bidders is that they don’t have access to all the Shaikan data. But there is a group of companies who do have that data and those are the NOCs and IOCs currently bidding for the back-in rights.

So who is a prime contender to bid not only for the back-in rights but also for the whole company? I have done some research into the various IOC and NOC contenders and plumped for the KNOC as the most likely initial bidder. For me the KNOC fits the profile of a likely bidder because:
1) They have the cash and the motivation. They are wholly owned by the Korean government which gave them a $6.5bn war chest (some reports say $12b) with a brief to secure more oil and gas for Korea. The last KNOC annual report makes clear that their strategy is to “purchase large scale production assets by 2012”. They have a target of acquiring 300,000 barrels/day of which Dana Petroleum has given them about 50,000.
2) They have shown that they like to buy in Kurdistan. They have 5 exploration licenses already.

3) The Korean government has excellent relations with the KRG. About 600 Korean troops were stationed in Kurdistan during the war and they were mainly medical and engineering doing “hearts and minds” tasks. When they withdrew, the Koreans signed infrastructure support deals worth over $2b with the KRG but at the same time the Koreans explicitly said they wanted a quid pro quo. The Kurdish PM visited Seoul in 2008.

4) Although hostile takeovers are rare in Korea, the KNOC have the aggression to mount a hostile takeover if necessary as they did with Dana Petroleum (see note below).

5) The Koreans are allies of the US. This is important as I cannot see Obama’s popularity being boosted if it becomes clear that despite the loss of so many US lives in Iraq, the company with a stake in the world’s largest on-shore oil find in over 40 years has been sold to the Chinese.

6) There have been persistent rumours on this bb that the back-in rights are going to the KNOC (eg Rafabenitez on 11/4).

7) And the final piece in the jig saw is that the Koreans have sorted their relations out with Baghdad. In August 2010 Baghdad excluded the KNOC from bidding for contracts in the south because of its involvement in Kurdistan. But on 20th April 2011 we see that relations have been patched up and Al-Maliki is about to visit Seoul to discuss infrastructure projects. It is inconceivable to me that Al-Maliki could now declare the KNOC licenses in Kurdistan illegal because the KNOC is a wholly owned part of the Korean state. There is almost zero political risk for the KNOC anywhere in Iraq. What other NOC or IOC can say that?

Can anyone think of another IOC or NOC that ticks all the financial and political boxes in the way the KNOC does? The big IOCs are still put off by the contracts both in Kurdistan and the south. The Chinese don’t pass the US ally test. Smaller or mid size oil companies may not be able to convince the KRG that they have the huge financial resources that will be needed to exploit properly GKP’s license areas. Etc.

The next question is the timing of the bid. As I have said earlier, it needs to come before the back-in rights are announced. And given the AGM in Paris in mid June, my guess is that the bid will come far enough in advance of the AGM to turn it into an EGM with a vote on the take over bid. By my calculations there would therefore need to be an announcement before the last week in May.

If the bid comes from the KNOC what sort of strategy will they adopt? We can learn much from the Dana bid. By the time the KNOC went public with their offer they had already sown up the support of about 38% of the share holders. They were able to do this because 25% of shares were in the hands of what was described as “arbitrage hedge funds” and 13% with Schroders and the KNOC seems to have obtained their support for the takeover before going public.

Could the same thing be happening to GKP? Could back room deals be being done that do not require the KNOC to disclose a 3% holding? We won’t know until the bid comes in but GKP probably has a much larger group of PI holders than Dana so a prior deal will be more difficult but not impossible. The opportunity for the KNOC with GKP is that whereas the Dana board had only about 2% of the company, the GKP board have nearer 10%. For that reason it would seem much more likely that a bid for GKP will need to be agreed with the directors and will not go hostile as the Dana takeover did. The KNOC was advised by Bank of America ML on the Dana deal.

And the main question is what will be the level of the bid? One has to start from the position that the KNOC will want to pay as little as possible but will also want the bid to seem attractive so that it has a chance of success. When the KNOC bid for Dana they offered a 59% premium to the share price. That would clearly be laughed at for GKP. But my guess is that they will go for the sweet spot around £5. This would be: a) a useful premium on the 375p directors share options for 2011, b) triple the share price from here and c) still give the KNOC the chance to double their return within 2 years. It is an understatement to say that many of us would be very disappointed by a £5 take over.
All highly speculative but food for thought while your nearest and dearest are making you watch that wedding.



GKP Offered Back In Right Arundallio

I posted a couple of weeks back that I believed GKP and Brokers were working in concert to supress the SP and manage expectations. Others have said the SP is being held back as a placing is in the offing?
If GKP have been offered first refusal og BIR's perhaps, just perhaps it will be valued on a Market Cap basis at thee June Date? In which case case a low SP would be an advantage to GKP?


By Scaramouche
Excellent post TPO, and so much more refreshing to stimulate debate about what could have a massive influence on GKP’s future in only a couple of months time, than petty playground squabbles which seem to have occupied the BB for much of the day.

Interesting too when you note the absence of certain names from the extensive list of those who ticked up your post, as this is perhaps indicative that they have no real interest in what happens to GKP after all, and are here primarily to cause trouble!

But let us get right back to 'back-in-rights'!

I agree with very many of TPO’s comments, in particular that the awarding of those rights to Shaikan by 30th June will be very revealing, since it may help to provide a clearer indication as to how the NOCs or IOCs value Shaikan in its entirety.

And I agree that the most likely buyer is KNOC, but with SINOPEC (who have history in Kurdistan of buying assets despite opposition from the ICG) and MARATHON (with a part share already in a block adjacent to Shaikan) also being realistic front-runners. Alternatively, even HUNT OIL could be considered, as they are another of GKP’s close neighbours and one of the first to take the brave step of exploring in Kurdistan.

But, to me, perhaps even more important than who might take up those back-in-rights, the burning question is how they might be valued:

1. It could be based on the GKP’s SP at the time.
However, that would seem somewhat irrational since the SP can move dramatically based on events entirely outside of GKP’s control. World events like the ME crisis and the Japanese Tsunami helped to take the SP down to 115p, while Maliki’s widely reported comments in February saw it swiftly reaching £2.

2. It could be based on which company offers the most, just like the bidding for contracts that are offered in Southern Iraq.
But I can’t really see this being strictly an ‘auction’ process, since of great importance would be whether GKP, and the KRG in particular, were happy with the resulting partnership.

3.Or it could be based on the true ‘value’ of those rights, taking into account factors like the Oil Price, the OIP found to date, the expected Recovery factor, and what the terms of the existing contract actually provide to GKP in terms of profit oil.

Now, wouldn’t that be interesting – maybe we would then be able to see whether Spidey’s NAV calculator was almost on the money, if we used it to recalculate what the back-in–rights ought to be worth, given news to date. Assuming we subsequently learned how much was actually paid, we could easily compare how closely it came to our prior expectations.

What is also intriguing is how, after OIP figures at Shaikan stayed at 4.2 billion barrels for nearly 15 months since the DGA report in January 2010, we have only just seen them increased massively to 7.5 billion on a P50 basis... just in time for the awarding of those rights.

That RNS alone SHOULD have increased the Shaikan valuation by about 80% and so the ‘value’ of the back-in-rights accordingly. Could the timing of that news release be possibly more relevant than we originally thought?

What I am less convinced by, however, is whether possible competition for Shaikan’s back-in-rights is likely to be accompanied by a bid for GKP. It might be but, only about 6 months into a scheduled 18 month drilling and appraisal programme, it seems far too early for GKP to start considering offers, and £5 would not IMO convince very many to part with their shares.
As I have said before, Sheikh Adi could so easily be the ace up TK’s sleeve and, while we might all be keen to hear the early ‘Discovery’ news from there, were that information to be in the public domain it might lead to a bid that sounded good but still failed to take account of the true potential of GKP. I am therefore happy to wait until a more opportune moment for that news.

Another possible trump card would be the 3D seismic information which JG said at the Oil Barrel Conference was likely to come out in June. We know that GKP have already seen the preliminary results, and it might be that they are keeping this particular card very close to their chest... just in case they need to blow one or two opportunistic bids away.

Yes, many posters have said it already but June is likely to be a monumental month in the history of GKP:

Sheikh Adi should be nearing completion.
Shaikan-2 could be revealing further secrets.
Seismic results could be almost ready.
Maliki could be assessing the performance of his key Ministers under his 100-day rule.
The Iraqi Oil & Gas Law might not be passed but we should have seen quite a bit of progress under Al-janabi’s apparently very able Chairmanship.
The back-in-rights for Shaikan should be awarded.

Oh, and I very nearly forgot – there will be the little matter of an AGM taking place in Paris... involving a mid-cap Oil Exploration Company that could, quite conceivably, have found the largest on-shore oil field anywhere in the world.... in the last 30 years!


Baillie Gifford run the Mid Wynd Investment Trust
Gulf Keystone are mentioned in the JUNE 2010 Annual Report (p.16) for that Trust


Under Transactions on P16: ““DNO and, more recently, Gulf Keystone Petroleum are both related to the opening up of Kurdistan’s oil basins.”

So, we KNOW that Baillie Gifford had already bought into GKP in a small way SEVERAL MONTHS BEFORE November 2010 when you say that your evidence is that they first started buying.

Investor48 seems to have definite knowledge that they received shares in the October 2010 placing. I do not, but I am rather inclined to believe he may be right!

We also know that 78 million shares were issued in that placing. So, unless anybody can provide a definitive list of exactly where those placing shares went, I think it perfectly reasonable to assume that they went to some of the Institutions that seemingly appeared from nowhere and are now on GKP’s list of major shareholders.
You have also previously highlighted a ‘discrepancy ‘of 82 million shares that seem to have been accumulated by IIs over the past few months over and above the number that they have sold. It is surely no coincidence that we have never seen the details of who acquired the 78 million shares in the placing!
I always appreciate the depth of your research, but I think that trying to collate information from various sites (without any guarantee that the information is 100% correct and up-to-date) is fraught with difficulties and therefore not reliable.

The ONLY shareholdings information I believe that should be used is what GKP announce officially via their website or Annual reports etc., or what the Institutions themselves show in their reports.

GLA, scaramouche

Apr 22 2011

Areas of New Investment in Iraq

Baghdad- An official source at the National Investment Commission that the Authority is currently preparing the final version of the investment zones in Iraq through a central committee under the chairmanship of the Board and membership of a number of investment organizations in the provinces, indicating that the formula will take into consideration the possibility of implementing the investment zone first at the site of Hittin in the province of Babylon before the end of this year to be distributed to other investment areas of Iraq’s provinces according to the vision planning centralized coordination between the National Investment Commission and the Ministries of Finance, Planning and Industry and Minerals.

The source said during a statement received by the (morning) a copy of that body, in a bid to encourage and enable private foreign investment in Iraq and in order to overcome some obstacles that accompanied the implementation of investment projects have adopted a new concept of investment called a label (investment areas), based on the text of Article 9 / VII of the Investment Law No. 13 of 2006.

He pointed out that the authority made in this direction, concrete steps in cooperation with the Organization of Economic Cooperation (OECD) and prepared a strategy for the establishment of these areas based on the reality of similar patterns in Iraq, free zones and industrial zones in the concept of new areas of investment is different in its economic and administrative for the free zones and industrial applicable them.

The Board has prepared earlier in the general framework of the strategic establishment of investment zones in Iraq and discussed in their meetings held in Amman recently Kiffa the establishment of investment zones proposed in the whole of Iraq a six regions distributed over the provinces (Babylon, Baghdad, Basra, Nineveh, Anbar, and the Middle Euphrates region which is located between the provinces of Karbala and Najaf) also discussed the meetings a number of themes relevant of the current status of economic zones in the Middle East and North Africa and Iraq, where the evaluation of some experiments in the region and highlight the main lessons learned to work on the strategic economic zones in Iraq.

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16:33 Areas of New Investment in Iraq SpikeyDT

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Apr 22 2011

Areas of New Investment in Iraq

Baghdad- An official source at the National Investment Commission that the Authority is currently preparing the final version of the investment zones in Iraq through a central committee under the chairmanship of the Board and membership of a number of investment organizations in the provinces, indicating that the formula will take into consideration the possibility of implementing the investment zone first at the site of Hittin in the province of Babylon before the end of this year to be distributed to other investment areas of Iraq’s provinces according to the vision planning centralized coordination between the National Investment Commission and the Ministries of Finance, Planning and Industry and Minerals.

The source said during a statement received by the (morning) a copy of that body, in a bid to encourage and enable private foreign investment in Iraq and in order to overcome some obstacles that accompanied the implementation of investment projects have adopted a new concept of investment called a label (investment areas), based on the text of Article 9 / VII of the Investment Law No. 13 of 2006.

He pointed out that the authority made in this direction, concrete steps in cooperation with the Organization of Economic Cooperation (OECD) and prepared a strategy for the establishment of these areas based on the reality of similar patterns in Iraq, free zones and industrial zones in the concept of new areas of investment is different in its economic and administrative for the free zones and industrial applicable them.

The Board has prepared earlier in the general framework of the strategic establishment of investment zones in Iraq and discussed in their meetings held in Amman recently Kiffa the establishment of investment zones proposed in the whole of Iraq a six regions distributed over the provinces (Babylon, Baghdad, Basra, Nineveh, Anbar, and the Middle Euphrates region which is located between the provinces of Karbala and Najaf) also discussed the meetings a number of themes relevant of the current status of economic zones in the Middle East and North Africa and Iraq, where the evaluation of some experiments in the region and highlight the main lessons learned to work on the strategic economic zones in Iraq.


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16:16 Re: scaramouche> Mikey scaramouche 1

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Baillie Gifford run the Mid Wynd Investment Trust

Gulf Keystone are mentioned in the JUNE 2010 Annual Report (p.16) for that Trust


Under Transactions on P16: ““DNO and, more recently, Gulf Keystone Petroleum are both related to the opening up of Kurdistan’s oil basins.”

So, we KNOW that Baillie Gifford had already bought into GKP in a small way SEVERAL MONTHS BEFORE November 2010 when you say that your evidence is that they first started buying.

Investor48 seems to have definite knowledge that they received shares in the October 2010 placing. I do not, but I am rather inclined to believe he may be right!

We also know that 78 million shares were issued in that placing. So, unless anybody can provide a definitive list of exactly where those placing shares went, I think it perfectly reasonable to assume that they went to some of the Institutions that seemingly appeared from nowhere and are now on GKP’s list of major shareholders.

You have also previously highlighted a ‘discrepancy ‘of 82 million shares that seem to have been accumulated by IIs over the past few months over and above the number that they have sold. It is surely no coincidence that we have never seen the details of who acquired the 78 million shares in the placing!

I always appreciate the depth of your research, but I think that trying to collate information from various sites (without any guarantee that the information is 100% correct and up-to-date) is fraught with difficulties and therefore not reliable.

The ONLY shareholdings information I believe that should be used is what GKP announce officially via their website or Annual reports etc., or what the Institutions themselves show in their reports.

Best regards,

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16:09 Re: A piece of the action->pie MikeyAdmin 2

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mr reliable.

From GKP themselfs, many of the board have made statements regarding a consolidation of assets in Kurdistan when the Politicals are sorted.

Its my view, that like with all T/O's of Oilys, the Buyer takes blocks at various stages of production, appraisal, and exploration, and of all sizes, so why should GKP be any different.

When the time of an Offer comes that is close to being exceptable, then GKP will show the Offeree/s the information it has from all its block, in an attempt to get the Price up.

The Offeree/s will do their due diligence and get back to GKP.

Thats how it always worked for eon's, so I'll let things take their course, and not worry about any T/O price for now.

Still it makes good reading inbetween fitting the hood on the car and having a brew.

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16:09 The Kurdish Issue mr reliable

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When speaking to Ewen GKP's FD he suggested that i get an understanding of the Kurdish people. So this is an Excellent article explaining the Kurdish people in Iraq and Turkey which helps to understand the attitude of the Kurdish politicians/people.

When chemical weapons were used by the Iraq government against the Kurdish people it does not make for easy political relations in the future. But thats only a small part of the story......

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15:53 Re: Letter to GKP MARKETCHASER mr reliable 3

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Thats what comes from using this BB. The spelling goes,then the nails,the hair dissapears and the mind starts to go.
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15:50 Re: A piece of the action->pie mr reliable

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renardargente I agree with you 100%. In a perfect world 2013/4/5 when all appraisels are completed and then sold on.

However a reliable source has meantioned that the longest timescale GKP may be able to last could be until the end of Shakians appraisels. This was an informed opinion from about a month ago. However thing change.

The practical difficulty GKP has is can they cope with being an oil producer at Shaikan? Once appraised the KRG are going to expect production. This is not GKP stated aim as an oil explorer.
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15:47 Re: Letter to GKP MARKETCHASER 1

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Download spellcheck Mr R - your spelling is carp
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15:45 Letter to GKP mr reliable 2

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May as well keep them busy.

To: ir@gulfkeystone.co.uk
Subject: For Ewen query
Date: Fri, 22 Apr 2011 14:41:07 +0000

Dear Sir/Madam

Firstly, I would like to thank Ewen for speaking to me on a few occassions and IR for replying to specific queries.

I am a GKP shareholder and have a specific query. Is it not possible to sell GKP's interests in their blocks on an individual basis?
Clealy there are a number of reasons for this.
1) First and foremost this could be in the best interests of us as shareholders. Many of us have held our shares for a long time with potential
large risks to our capital. This is specified under the risk factors on GKP's presentations.
2)It is unlikely that an oil major will pay anywhere near fair value for GKP as a whole due to the expence.
3)We will then have the time to appraise all of our licences/blocks.
4)Payments of sales could be made via special dividends.
5)GKP would surely then be able to aquire further licences in Kurdistan or elsewhere and therefore continue as a successful exploration company.
Point 5 would be great what would all the investors involved in GKP do without having to ponder over what the company is doing next!!
6)I realise their may be practical difficulties with this scenario but it is worth a thought.
7)I appreciate that investor value has increased and thank the GKP team.

Thank you in anticiption of your responce

Kind regards


Very often we see investments in emerging markets making a small fortune for people. To put into context our investment into GKP this is an interesting read. Bear in mind how much influence the world bussiness comunity has on Iraq/Kurdistan.

CT Group Travel in conjunction with UK Trade & Investment and The Middle East Association launch trade mission to Kurdistan.

Tunbridge Wells, Kent (PRWEB) April 21, 2011

Iraq is poised to be one of the world’s leading emerging markets, driven by oil revenues and economic development across the board. Part of the government’s five year development plan is to attract over $6 billion in foreign investment. The government also intends to privatise 250 state owned enterprises by 2020, including production in areas such as petrochemicals, steel and pharmaceuticals.
One area in particular which has seen significant economic growth over the past five years is the Kurdistan Region in Northern Iraq. It has attracted over $14 billion in investment for 259 projects, of which $4 billion is foreign investment. With the Kurdistan region producing some 700,000 barrels of oil a day, there is huge potential for associated and downstream industries such as petrochemicals and plastics.

In light of the market potential Iraq offers and the pro-active measures the government is taking to attract foreign investment, CT Group Travel in conjunction with UK Trade & Investment and The Middle East Association with the assistance of the Kurdistan Regional Government (KRG) have put together a new Kurdistan trade mission taking place on 23rd to 27th October 2011.

The trade mission has been purposely set to coincide with the 2011 Erbil International Fair, which is the largest general trade fair in Iraq covering various economic sectors. Supported by a large number of trade promotion agencies, chambers of commerce, associations, ministries and embassies, the fair will attract more than 850 exhibitors from over 25 countries from around the Middle East, Asia, the Americas and Europe. It is anticipated some 75,000 visitors will be attending the four day event.

Mark Kempster, UNIGLOBE CT Group Travel Managing Director commented, “We are delighted to be operating a trade mission to Kurdistan as it presents a great opportunity for UK companies to meet relevant and vetted Iraqi and Kurdish businesses. Attendees can have peace of mind the mission will be productive given our partner - The Middle East Association - has organised and led six very successful trade delegations to the Kurdistan region of Northern Iraq during the last four years, so they have first hand knowledge of the Kurdistan market. In addition, not only will delegates enjoy greater savings by booking through us due to our specially negotiated group travel rates, but we also have our own office based at the Rotana Hotel offering support and assistance when needed, and attendees can also know all transportation has been specially arranged including security”.

UNIGLOBE member CT Group Travel are specialists in providing travel management services for groups, as well event management and conference management.



Redenomination and the Spinal Tap fallacy
Posted on 20 April 2011. Tags: Banking & Finance, iraqi dinar, Redenomination

Fans of the “rockumentary” This is Spinal Tap will recall the scene where the band’s guitarist explains that his amplifiers are louder because their volume knobs “go to eleven.” When asked why this is different from having ten as the highest setting, he simply repeats “these go to eleven.”

Most of us have no trouble understanding that changing the units used to measure something does not change the character of the thing being measured. A day doesn’t get longer if you keep track of time in minutes instead of hours, four quarts isn’t more than one gallon, and paying for something in pennies instead of dollars doesn’t make it more expensive.

Yet somehow people continue to claim that a redenomination of the Iraqi currency will have important economic effects. (See this story.) Replacing all the dinars currently in circulation with new ones at a rate of 1,000 to one, thereby “knocking off three zeros,” is supposed to reduce the money supply, for example. Instead of the commercial banks holding 27 trillion dinars as central bank reserves, they will “only” have 27 billion. People won’t have to carry as much money once all the thousand dinar bills have been replaced by one dinar bills. And so on.

It would obviously be ridiculous to insist that an amp that “only” goes to ten would be softer than one that “goes to eleven.” Isn’t the claim that it matters how many zeros there are on a bank note an example of the same fallacy?


scaramouche MikeyAdmin 1

You recently assumed that Baillie Gifford and several others acquired their shares in the October Funding Issue.

Sorry but hat asssumtion is wrong my friend.

Baillie Gifford first acquired shares after the 1st Nov 2010, as did Alliance Bernstein and JPMorgan, not from the Funding of October, and have acquired more since than reported on the GKP site.
There are others who have been acquiring also, along with existing ones on the new list.

In my post history, you can see when I posted the holdings, just when they started acquiring.

I have no evidence of anyone acquiring for a hostile T/O, and agree with you to some extent that any could be approached by a potential bidder.

If that was to happen though, it would mean that Mirabaud, who's job it is to attract Institutional Investers, has failed in their job of explaining to said new II's, the full extent of what a future T/O could be at.

That said, the chartist cannot see behind the book, so have not been able to see any such acqisition of shares.
So non of us know, the many unseen forces at work behind all "to be high valued" shares, to the extent non of us can truely comprehend what is happening unseen.


22 Apr 2011

Turkish mall open in Erbil
Text size

By Rebin Hasan

Erbil, April 22 (AKnews)- A Turkish company opened Thursday a new mall In Erbil, the capital city of the Kurdistan Region.

The new shopping area called Home Istanbul is located on 100 meter street, near Family Mall.

In the inauguration ceremony of the mall Irö Özel, a member of the managing board for Özel Group (the owner of the project), said the new center offers 17,500 different home appliance items and a range of other items on a 9,200 square meters space.
He said his company, with 30 years of experience in investment, hopes to open similar projects in the other cities of Kurdistan and Iraq in general.

Nawzad Hadi, Erbil governor hailed the project as "another testimony" for the continual economic boost and security in the Kurdistan Region and the "wise policy" of the Kurdistan Regional Government with regard to investment and encouraging the private sector. © AK News 2011


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Mirabaud would have full knowledge of all Shareholders IMO.
Though I would expect it to be up to the II or individual to report holdings.

I do find it strange that the 20 list on the GKP site, includes 11 that are under the 3% limit,


all of which do not appear on the TDW site, though thats not up to date, lol.


mr reliable

I am not sure of my facts. When companies who hold over 3% of a shareholding in a company they announce a reduction bellow that percentage. Then they are not legally required to inform the market.

I assume the same applies if holdings are permanently kept under 3%. Unless the holders volentarilly inform gkp.
I expect as wokinpark says the registrars will have this information however i am unsure if they will give this info to the public.

GKP can only supply the names and figures they are given by companies and individuals. Sometimes GKP may not be informed of holdings which are under 3%. This is an opinion and I am uncertain if it is correct although i believe it is.
Scara, Mikey, I've been a long time follower of your posts but do not normally feel that I have anything to add to the debate. Long term holder and holding till TO.

However surely the dispute as to shareholders doesn't need to await clarication/ an update from GKP.

The bye-laws of the company, page 22 http://www.gulfkeystone.com/uploads/byelaws.pdf

Provide that the share register and any branch register should be open to inspection between 10am to 12pm on every working day (or times that the Board shall determine) but makes it clear it must be available "every working day".

Presumably the master register is in Bermuda and I suppose not many people will be able to get over to look at that.

But has anyone actually asked GKP if there is a branch register kept in the UK and if so when and where can it be inspected? That might make all this debate academic.

UPDATE 1-Iraq-Kurdistan to reach oil revenue deal by yr-end


Iraq and Kurdistan are likely to reach a long awaited agreement on revenues from crude oil exports in the second half of 2011, an Iraqi government official for energy policy said on Tuesday.
Oil exports from the semi-autonomous region resumed in February after a long halt, but the controversial issue of payment has still not been resolved.
“The Kurd authorities requested it (the revenue deal) for June or July, but I think we will miss it. I expect it later this calendar year,” said Adnan Al Janabi, chairman of Iraq’s Oil and Energy Committee, on the sidelines of an industry conference.
Kurdistan is now exporting around 80,000 barrels per day (bpd), which could rise to 200,000 bpd by the end of 2011, he added.
Bagdhad and Erbil, Kurdistan’s regional capital, have wrangled over oil revenues from the region for years. The Kurdistan Regional Government, which runs northern Iraq, has signed around 40 production and exploration deals with international oil companies.
Current exports from the Kurdistan region are worth around $10 million a day, based on Brent oil prices near $120 a barrel.
But Al Janabi is confident differences can be overcome.
“They are big issues but ones that we think can be solved, instead of having the stoppages of the last few years,” he said.
Al Janabi also said that he had submitted a new draft law to government for the creation of an Iraqi national oil company. This is seen as an important precursor for a hydrocarbon law to establish a formal legal framework.
“I have already tabled the draft law of the NOC in Baghdad … I hope we will get it in weeks,” he said.

My Shares are held by TDW in a Nominee Account.

On the TDW Web Site, there is a page for "Voting & Information Preferences" to which I have subcribed.

As we know, the AGM has been brought forward this year.

For obvious reasons, I attatch great importance of this years AGM being brought forward, so I have taken the time and sent an Email to TDW, requesting notification of Resolutions to be voted on at the AGM.

I have also sent an Email to GKP, requesting a list of the Resolutions to be voted on, to be sent in good time.

I am hoping to attend the AGM, to which end, I have also requested from GKP, the venue, at which time I can make arrangements to attend.

Whilst my vote will carry no weight at all, the combined weight of the PI possibly can.

I know folks hold shares with various Brokers, and in various forms, actual and CFD, so each concerned shareholder should check out how their voting rights will be used.

Worldwide takeover activity and funding
Why should figures well in excess of $10billon be difficult to acheive for the largest oil find in 40 years???

The 1,000 biggest companies worldwide, excluding financial- services industries, have amassed more than $3 trillion in cash and equivalents based on their latest filings, according to data compiled by Bloombrg

The 26 percent recovery in global M&A for 2010 didn’t live up to the expectations of some dealmakers after a dearth of megadeals. In 2010, only two takeovers topped $25 billion, 31 in the range $5 billion to $25 billion, the number of deals ranging from $1 billion to $5 billion in size jumped 52 percent to 369 in the same period, the data show.

Private-equity firms have made fewer large purchases in recent years, even though they have more than $430 billion to invest, based on figures from Preqin Ltd. There is, however, the capacity for more straightforward corporate takeovers that don’t involve private equity, said Andy Lipsky, head of Credit Suisse Group AG’s mergers and acquisitions for the Americas.

“$10 billion strategic deals are easy now if they make sense,” he said. Lipsky this year worked on Colombia-based Grupo Aval Acciones y Valores SA’s purchase of BAC-Credomatic GECF Inc. from General Electric Co.’s finance unit for $1.9 billion. He anticipates 2011 deal volume will rise about 20 percent in the Americas amid continuing direct investments in emerging markets, such as China and Brazil

Many of 2010’s biggest deals fell through, including BHP Billiton Ltd.’s $40 billion bid to buy Potash Corp. of Saskatchewan Inc. and Prudential Plc’s failed attempt to acquire American International Group Inc.’s Asian business for $35.5 billion. Buyout firms had to abandon plans to take private Fidelity National Information Services Inc. and disk-drive maker Seagate Technology Plc

An interesting read -- Oil and Gas report by Earnst Young


Besides the normal capital and IOC market one must include the NOCs with very deep pockets-------- the amount of cash available to purchase the PRIZE that is GKP should be viewed on a worldwide scale for a diminishing product.
The sheer long term value of the product which GKP has found even allowing for the majority going to Iraq and Kurdistan is still enourmous and all we can hope is the true market value comes to the surface.

Baghdad pays KRG contractors

By Ben Van Heuvelen of Iraq Oil Report
Published May 6, 2011

Iraq’s central government has made its first-ever payments to oil companies operating in the semi-autonomous Kurdistan region.

“The triggering of the oil payments mechanism signifies the commitment to resolve the outstanding issues between Erbil and Baghdad in accordance with Iraq’s Constitution,” said Barham Salih, prime minister of the Kurdistan Regional Government (KRG), in a press release Thursday.

Iraq’s Ministry of Finance has released $243 million for the KRG’s contractors, in payment for more than 5 million barrels of oil that were exported between the beginning of February and March 27, according to Salih.

It’s not clear whether the companies are turning a profit, or whether they’re even being fully compensated for their operating costs. Salih said the payments represent “around 50 percent of net revenues” from exports.

The KRG has signed 40 production-sharing contracts with international companies, in defiance of the central government, which claims ultimate authority over the country’s oil sector and has called the Kurdish deals illegal. As a result of the dispute, Kurdish oil has been largely shut in, since Baghdad controls the export pipelines.

The conflict reached a tentative breakthrough in January, when Iraqi Prime Minister Nouri al-Maliki negotiated an agreement with Salih to export oil from two Kurdish fields — Tawke, which is operated by Norway’s DNO, and Taq Taq, operated by joint venture between Turkey’s Genel Enerji and China’s Sinopec.

The crude began to flow on Feb. 2, and in the past month increased to an average rate of 135,000 barrels per day (bpd), according to the KRG’s Minister of Natural Resources Ashti Hawrami. By the end of the year, he said, Kurdistan expects to be exporting 200,000 bpd.

Baghdad and Erbil reached a similar export deal in 2009, but it soon fell apart. The Kurds claimed the central government should compensate the companies directly, while Baghdad authorities said that the KRG, as signatory to the contracts, was obligated to pay out of its own regional budget. Without payment from either party, the companies soon stopped production.

Both sides now have growing incentive to resolve the conflict.

The central government has faced the prospect of a budget shortfall, and needs revenue from Kurdish production. The 2011 budget counts on at least 100,000 bpd of production from the KRG. The Kurdish region, for its part, has staked its economic future on dozens of oil deals that cannot turn a real profit without reconciliation with Baghdad.

Although the payment of Kurdish contractors does represent a step forward in KRG-Baghdad relations, it remains the product of a political agreement rather than a stable legal framework.

Salih said he hoped “this positive development would add impetus to discussions over a long-delayed raft of federal oil and gas related legislation.”

Iraq’s constitution does not draw sharp lines of authority over the oil sector, instead calling for a series of laws to clarify the matter. Draft oil legislation did materialize in 2007, but it stalled in Parliament, entangled in the broader KRG-Baghdad conflict.

In its absence, both sides have improvised the legal basis for their respective oil development. The KRG passed its own oil and gas law in 2007, and Baghdad has relied on its interpretations of the constitution and Saddam-era laws to sign a dozen contracts with the world’s largest oil companies, which aim to boost Iraq’s oil production from 2.7 million bpd to more than 13.5 million bpd within seven years.

In effect, the country has two parallel oil sectors. Bringing them in line with each other requires a host of negotiations over contract models, revenue sharing, financial auditing and — most importantly — control.

Since 2005, the oil issue has been a proxy battle in a larger debate between the KRG and Baghdad over federalism. How autonomous is the Kurdish region, and how much authority rests with the central government? Iraq’s lawmakers haven’t yet negotiated the passage of legislation that would begin to answer these questions — a debate that is sure to stoke more controversy.

“The start of the payments will only serve to add confidence in and further strengthen our policy,” Hawrami said.


Gulf Keystone Boosts Estimates from Shaikan Discovery
Gulf Keystone Petroleum Ltd.
Thursday, April 14, 2011

Gulf Keystone announced a major revision of the gross oil-in-place volumes for the Shaikan discovery in the Kurdistan Region of Iraq.

The revised gross oil-in-place volumes for the Shaikan discovery, as calculated by Dynamic Global Advisors (DGA), independent Houston-based exploration consultants, are a P90 value of 4.9 billion barrels to a P10 value of 10.8 billion barrels of oil-in-place with a mean value of 7.5 billion barrels and a P1 value of 15 billion barrels.

This is a very significant upward revision from the previously announced range of 1.9 to 7.4 billion barrels of gross oil-in-place with a mean value of 4.2 billion barrels and a P1 value of 13 billion barrels, also calculated by DGA. The revision is based on the data acquired since the last resource evaluation of the Shaikan discovery by DGA issued in January 2010, which was supported by an additional third party analysis by Ryder Scott consultants with a range of gross total petroleum-initially-in-place (PIIP) of 1.52 (P90) to 7.52 (P10) billion barrels.

The new data has been acquired as a result of:

* Shaikan-2 oil discovery and well test in the upper section of the Jurassic section, nine km to the east of Shaikan-1
* Shaikan-1 extended well test production
* Shaikan-3 testing and production results
* Preliminary results of the analysis of 3D seismic data acquired for the Shaikan (599km²) and Sheikh Adi (215km²) blocks
* Evaluation of existing seismic lines and regional geological data for the Ber Bahr, Akri-Bijeel (Bijeel-1 well) and Sheikh Adi blocks.
* PVT (pressure, volume, temperature) analysis of oil samples from the Triassic Kurre Chine tests at Shaikan-1.

The Shaikan-2 appraisal well is now drilling deeper into the Jurassic and is scheduled to drill on into the Triassic. Once the well reaches TD at the bottom of the Triassic or into the top of the Permian interval, the Company will consider a possible further revision of the Shaikan oil-in-place volumes, taking into account additional information from the reservoirs previously only penetrated by Shaikan-1 and from potential additional discoveries from possible zones below those reached by Shaikan-1, projected by DGA to contain an additional 1 to 5 billion barrels of prospective resources.

John Gerstenlauer, Gulf Keystone's Chief Operating Officer, commented, "We have always believed that the initial gross oil-in-place range for the Shaikan discovery was a conservative estimate that would increase as more information became available. This gross oil-in-place volumes revision by DGA, entirely supported by the Company's management and Board of Directors, confirms that belief. We eagerly look forward to additional drilling results from Shaikan-2, the soon to be spudded Shaikan-4 and the remainder of the Shaikan appraisal drilling program. We firmly believe that even with this upward revision the numbers for the Shaikan discovery are still conservative."


By MikeyAdmin

I few weeks ago I mention about what would happen if all the Shorts closed at once.

The vast majority of them are being used for a purpose, and most opened in the low to high 160's, with some opened yesterday around 159p

If they are there for the purpose of profit, why open more, why not take the profit.

If they are to Hedge a Long, then the Long must be large to make it worth the while, as some would be closed at a loss. Again why open more.

If they are there for Liquidity purposes, why not allow it to rise to gain the Liquidity.

If they are there for the purpose of weight on the Ask, with those opened used to control the price in an area for aquisition, then two things will happen when they have finished.

The Ask weight will reduce suddenly.
The Shorts will close starting a rise.

Perhaps EA when he mentioned come back in June, knew something would happen in June, and it would be the catalyst of the next rise.

What do we know of June.
The AGM, the E case, and the BIR's for certain, maybe further News.

The shares on loan must be something to do with the flatlining, or my aching puzzler can't see something.

Eliminating any II's holdings from the Public hands, means we lose their percentage, which in turn means they are no where.

The 30% IMHO, is below.
No II has the right to nominate a board member, unless they hold over 30%, another number.

You are correct with II's, as their holdings are paid for by the PI, and more numbers.

no value will be attatched to the BinR by GKP, other than the percentage costs to date to GKP & MOL

Any charges the KRG or ICG will make, for part of a derisked super licence like Shaikan, we will probably never hear of.
Gulf Keystone was originally founded by UAE, Kuwaiti, Saudi and US private equity and was incorporated in Bermuda in 2001. The company listed on the Alternative Investment Market of the London Stock Exchange on 8 September 2004.


3. Our current SP could be used to "value" a legal settlement. We could get an XEL effect, whereby a legal claim is settled (and SP floors) only to recover on subsequent good news.

4. The Directors sold at £1.84 back in Feb, so you could say that a CEILING was created at that point. I might add that I have no problems with Directors taking cash off the table, and it was a small amount, but in hindsight they did do it at the right time...........

We are just guessing..............


You make some very valid points and I am happy to accept that the potential offers for the BIRs are probably unconnected to the level of the SP.

What seems interesting though is that the lack of share price movement lately seems on the face of it not to be providing a floor (or support) ... but a ceiling.

And it is a ceiling that has been in place for a very long period, especially when you consider the volatility that was a key feature of GKP for most of the last 6 months prior to the 14 April RNS.

My point (which may not have come over sufficiently) is that something has 'controlled' the rise which should have happened when the OIP figures rose by 80% then. This has never been adequately explained IMHO.

I therefore believe it appropriate to put forward ideas as to factors which may need to be looked at as possibly having had an influence on keeping the SP down.

To anyone with better ideas, the Floor is yours.... or should I say the CEILING!

If the value of a company is currently based almost entirely on a single asset and it is valued at £1.5 billion, how much would someone be prepared to pay for 15% of that asset?

And how much might they be prepared to pay for 15% of an asset apparently only valued at £1 billion?

That is the point I am making - and it seems entirely plausible that it will influence both the buyer and the seller. Not saying that it will ..or that it is the only way that things are valued. But it has to be a consideration, surely!



Genel Enerji-in talks with 3 oil majors on stake sale
Wed May 18, 2011 9:37am GMT

ISTANBUL May 18 (Reuters) -
Cukurova Group's Genel Enerji, a Turkish oil firm active in Northern Iraq, is in talks with three big global oil companies over a minority stake sale, its chief executive Mehmet Sepil told Reuters on Wednesday.
A stake sale will probably be for 20 to 25 percent of the firm, Sepil said, adding that talks had reached an advanced level with one of the global firms as there was huge interest in Iraq. He declined to name the companies.

Sepil added the stake sale talks for Genel Enerji are unrelated to Cukurova's tax debts, and through the sale they aimed to raise funds to expand the company's operations. (Reporting by Evrim Ergin)


Thanks to 1Waving for the above

fairenough11 - 18 May'11 - 14:07 - 89819 of 89838

As I posted last week,I can see Shaikan being sold to fund drilling/appraisal of SA/BB.There is no way TK will give the largest bloc,BB,away without finding out what Oil/Gas is present.The Genel news this am makes a sale or part sale of Shaikan more likely IMO, as the International companies try and get a foothold in this ONE SEA OF OIL.

Hi fairenough

I have long been against the piecemeal sell off of blocks but there is logic to what you are saying and a sell off of Shaikan would fund GKP to develop BB and SA which todd equates to 2X Shaikan. It would also allow GKP to take on further blocks. Fully funded the share price would be free from the perennial fund raising fears. Such a scenario seems much more likely and attractive - at least to this investor.

This could happen and Genel appears to be setting the president. Bring it on!


Herschel K - 18 May'11 - 14:37 - 89831 of 89838


I've long thought (and posted on this BB) that GKP would sell either a stake in Shaikan, or the whole asset (once appraised).

It is big enough to do so and it also removes the problems associated with: -

1. Trying to value untapped potential (Ber Bahr); and
2. Trying to find someone with enough cash to buy out GKP as a whole, without undervaluing our remaining assets SIGNIFICANTLY pre-appraisal.

What we could potentially have - this 60BB or 100BB OIP that is referred to by some - is beyond anything the world has seen in DECADES!!

What GKP should therefore do, IMO, is appraise Shaikan and then sell it.

This is just my opinion, but personally I believe GKP are looking into the pipeline feasibility SOLELY to facilitate the sale of Shaikan as an appraised asset with a direct route to the export market.

Imagine the difference to an IOC between selling it now and selling it with that in place.

I don't believe GKP intend to produce oil from Shaikan for export using the pipeline; IMO they will do so using trucks and, once the pipeline is in, sell it completely (perhaps with a royalty!).


Hi Herschel / Fairenough

I think that Todd may well have been approached with such a scenario - in fact I would be amazed if this has not been raised on more than one occasion.

With Genel offering to farm down their blocks, and there appears to be multiple interested parties responding to their initiative, I think it very likely that our BOD have also been approached and may be actively considering some such proposals, particularly in relation to Shaikan.

The temptation to take such an offer given the huge potential offered by BB coupled with the increasing knowledge of Sheik Adi concerning the OIP figs coming quickly via the drill bit and the 3D seismic, means that I can see a tipping point approaching where such an offer could not be turned down given that the 'Prize' at BB and SA may be twice that on offer at Shaikan!

We live in interesting times!


Edit: by the way I agree with you on the pipeline issue!


SOMO deals with International Companies to sell Iraq crude Oil
Posted on 18 May 2011. Tags: SOMO, State Oil Marketing Organization

Iraq’s Ministry of Oil stressed that it is cooperating with international companies to sell crude oil, pointing that Iraq is the only country that exports its crude oil to more than 25 international companies.
On the sidelines of a forum held by SOMO over Iraq’s oil exports mechanisms the director of Iraq’s State Oil Marketing Organization (SOMO), Falah al-Ameri, told Alsumaria News that Iraq is selling its oil to international companies involved in extraction and refining, such asExxonMobil, ConocoPhillips, BP and Shell.

The second kind of companies Iraq is dealing with are the smaller independent international companies, and other refining companies such as Valero from the US and IOC in India.

During the first 10 days of each month SOMO holds meetings in order to follow-up international oil market indicators in order to set the prices for the month to come which is fixed according to the international demand for Iraqi oil, which contains sulfur, in the current month and next month.

Iraq’s crude oil, the majority of which is produced in and around Basra, contains 2.2% sulfur and the demand for it is higher during winter as it contains white oil and gasoline while the light oil produced in Dubai and west Texas and Europe is mainly used to extract benzene.



lots of excellent photos of the area where we are all invested.


Most importantly, I don't think there is any doubt that the journalist, Liz Sly, was (and perhaps still is) on the current Analysts and Media trip organised by GKP.

Amongst the 20 photos attached to the article are:
Slide 12: description: "Yazidis make pilgrimages to the Lalish temple with its conical spires and the tomb of 12th Century reformer SHEIKH ADI"

Slide 13: description: "Baba Chowish, the keeper of the Yezidi temple Lalish in Shekhan (SHAIKAN), Iraq".

On Friday, I posted that I saw the latest trip as a means of VISUALISATION... of the transformation of GKP into exlorer and producer. The article in the Washington Post, which came only a very short time into the trip, seems to be all about apprecaiting and recognising the transformation of Kurdistan.

The Washington Post also has a very high readership 1.43 million (30% of adults in Washington DC) according to the attached link.


So, something tells me that TK is using the 'Shaikan and Sheikh Adi experience' as a means of getting the message out to high net worth U.S investors and institutions.

Phase 2 of the plan will presumably be about Shaikan and Sheikh Adi... and the Oil! So, I can't wait to read what the papers and the analysts will have to say about that!

Should be an interesting week.

GLA, scaramouche


Some reasons why it is extremely unlikely to happen.

There are 762,223,498 shares in Issue.

As of the 1st March, they broke down as follows.

235,053,135 (30.84%) were considered not to be in public hands
(these belong to the original Founders of GKP, and are considered in Private Hands)

306,723,367(40.24%) are in Institutional Hands (considered Public Hands)

169,697,366, Are in Private Investors hands, held in Nominee Accounts.
50,749,630, Are held by Private Investors in their own name, including J Asher
220,446,996, (28.92%) Total

Total 762,233,498.
Just looking at the above figures, it is impossible for one Entity to gain the 30%, to mount a Hostile T/O, but would require a 75% vote to sanction such a move .
From the above figures, one can see that such a move would require the consent of a mixer of many Shareholders, so 99% impossible.
Any accumulation/trading that is currently happening, is being done by GKP’s current Institutions trying to get a bigger slice of the cake, and or, a possible Hedge Fund playing GKP

GKP as of the end of 2010 has $214,000,000 (£129,376,800) enough to Fund their current drilling Program, and has enough to continue until Q1 2012.
GKP also has the Oil Production to provide further Funding.

As Gramacho has gratefully explained, in his opinion anyone watching GKP, will not step forward to make an offer for any Company & Oil Field until certain criteria are met. They include:-
a) Fully Appraised to ascertain the size of Shaikan & Sheikh Adi, so they know what they are buying.
b) Fully Tested as to ascertain Recovery Factors and Production rates.
c) Full and continuous EWT Testing from more locations than SH-1/3
d) All the above cannot be quantified at present, so its doubtful anyone waiting in the wings will make a move now.

The uncertainty over the Contracts, also helps to protect GKP from any early Takeovers from any IOC or NOC, as they would not want problems with the ICG

Off course some complete and utter nutter of a Company could make an offer, but that is doubtful, as no Company would like to look foolish, or get laughed at by a rebuke by GKP, nor any other of the IOC’s or NOC’s.

IMHO, SA-1, (possibly SA-2) SH-2, SH-4, and SH-5 down to TD, and the all important OWC found, plus the use of the 3D Seimics, being used to fully understand Shaikan & Sheikh Adi, Plus some serious EWT Testing to recover Production rates, which takes GKP through to Q2/3 2012.

As always, figues in my mind remain there, but IMHO, when GKP eventually gets taken over, the price will surprise many folks.



At first glance from the update released last Monday the Sheikh Adi info struck me as poor news. Low permeability and limited fractures constraining flow rates - if honest put me into a sulk. A sulk purely down to human greed that only lasted an hour or three.
Far better was the SA news than the alternative, ie to have discovered no OIP but having encountered superb permeability and high fracture volume. Or heaven forbid, to have discovered a lesser-valued gas field - ala Heritage Oil. Not too concerned on the Market's reaction or lack of it, as they (the tactile Market) react with little or no indifference when GKP release superb news anyway.

Many of us wer'e hoping for 'Big' news on SA1, anything less achieved on a block gained at a hefty premium (thanks Etamic), especially with a 80% WI was always bound to disappoint.

Putting things into perspective SA can now be added as another oil discovery alongside both Shaikan & Akri Bijeel. All 5 drills to date have been succesful, albeit further pervasive methods required at SA1.

An oil discovery at SA1 bodes extremely well for a contiguous on-trend western extension into the Ber Bahr block, taking us another step closer to the theory of a super-giant oil field with a cumilitive size of 681 KM2, or put simply ...the size of Singapore.
It's worth mentioning that 681 KM2 is only GKPs highlighted prospect acreage, this does NOT include the lower foothill's and additional land contained within it's vast boundaries. Both Shaikan & Akri Bijeel are excellent exponents of this - should the GKP development story wish to continue (or any new prospective owner's) fancy a future on-trend land grab.

Getting back to Sheikh Adi. Initial well placement here was chosen long before 3D seismics were available. The Zagross fold belt region we are located near is known to have tectonically recumbent folds (reverse faults) adding to it's nonuniformity, and sadly, GKP drilled straight into one. A reverse fault is the opposite of a normal fault, the hanging wall moves up relative to the footwall with a shortening of the crust.

We encountered a 'dip fault' on the small 21 KM2 prospect of AB1 ( ¼ of the size of SA ) that yielded petroleum initially in place (PIIP) at P50 at 2,419 MMBOE in the Jurassic formations of the structure. The mighty Kirkuk field too had longitudinal reverse faults along it's southern flanks.

Testimont to these problems is Hunt Oil and earlier leaked spoof stories of an unsuccesful discovery on their Simrit 1, from what we can now gather oil was NOT the problem, their difficulties arose from the bewitching local carbonate. Suffice to say that Hunt now appear to have overcome matter's and are currently at the 'testing' stage.

Let's hope (if time permits, and predator's allow) GKP can drill to the north and try for Sheikh Adi2 to achieve a higher asset value and join up the dots so to speak. Further drilling would both confirm the variability of reservoir rock and help ascertain the homogeneity of reservoir facies across this srtucture.

As an aside to this, and as proven yet again, these difficult Kurdistan drills bear NO similarities to the pre prepared butter-like fields in the South. Punitive TSC's are one thing. Cost oil / recovery oil recompense payment through difficulties encountered in frontier Kurdy land is another. ....ICG please note !!


If both time & circumstances allow - heading North there is 'Sariyah Twin' prospect contained within the Sheikh Adi block.

The Sariyah prospect, can be viewed on Page 17 below:


Or, alternatively shown within a red boundary keyline (seismic tender parameter) within the Sheikh Adi block - on GKPs page 10 below:


Regarding Sheikh Adi we just took one good step forward. Artificial fracking at SA1 together with a future improvisation on an identified Northern well site should do the trick. Value & progression through the drill bit.

Spending several days away from things, enables one to weigh things up and ponder over all options. As of yet, no other E&P on the planet offers such future high-potential shareholder value, especially when one considers that last year Global oil consumption grew to 87 Million barrels per day, the largest annual rise for over 30 years, an increase largely due to China's appetite. Combine this demand with declining production in most of the world's older oil fields - it's a prize IMO thats worth holding onto.



WesternZagros skyrockets on Iraq oil find

May 31, 2011 – 11:46 AM ET | Last Updated: May 31, 2011 2:30 PM ET

Shares of WesternZagros Resources Ltd touched an 18-month high on Tuesday, after the company said it found oil at the Sarqala-1 exploration well in the Kurdistan region of Iraq.

“We will continue the testing to evaluate the full flow capability at the well and its potential for early production,” said Chief Executive Simon Hatfield.

No water was produced during the flow, the oil and gas explorer said.

WesternZagros, along with other junior explorers such as Longford Energy, is active in Iraq’s Kurdistan region.

Iraq has about 115 billion barrels of proven oil reserves and has numerous large undeveloped fields and unexplored areas, according to WesternZagros’ website. Of the 73 oil fields discovered in Iraq, only 15 are producing, the company said on its website.

WesternZagros holds a production-sharing contract with the Kurdistan regional government through its wholly owned subsidiaries.

Emerging markets such as Brazil, Colombia, Peru, Iraq, India and Indonesia are expected to be major growth drivers for Canadian junior explorers, given the cheaper costs of acquiring land and the opportunity to sell the property at a huge premium later.

WesternZagros shares were trading up 23¢, or 32%, at 93¢ on the Toronto Venture Exchange around mid-day. The stock earlier touched a high of C$1.00 and was one of the top volume gainers on the exchange.

© Thomson Reuters 2011


Iraqi oil exports unaffected after oil tank attack-official

05 Jun 2011 06:28

Source: reuters // Reuters

BASRA, Iraq, June 5, (Reuters) - Iraqi oil exports have so far not been affected after an attack on an oil storage tank in the south of the country, an Iraqi oil official said on Sunday.

The official said the tank near the Zubair oilfield had been isolated and the attack had not halted pumping to the Al Fao port where exports are dispatched.

The oil storage tank was hit early on Sunday by a bomb or a rocket, local oil and police sources said.

(Reporting by Rania El Gamal, Editing by Jonathan Thatcher)

((pat.markey@reuters.com, +964-7901-917-030)



Oil strike in Iraq holds promise for Abu Dhabi
Tamsin Carlisle

Jun 5, 2011

Oil has been struck in Iraqi Kurdistan by the Austrian petroleum group OMV, which is partly owned by an Abu Dhabi sovereign wealth fund.

OMV, in which the International Petroleum Investment Company holds a 20 per cent stake, said its Bina Bawi 3 well had encountered hydrocarbons in one of the primary reservoir targets. The company said it planned to investigate further.

"We are very pleased to announce this discovery of oil. It seems good quality oil and it was flowing to the surface following a drawdown test," said Jaap Huijskes, the OMV executive board member responsible for exploration and production. "We are now going to continue drilling but I am confident that the final results will be promising."

WesternZagros, a Canadian oil and gas exploration company that focuses on Kurdistan, on Thursday announced an oil discovery in the region's Jeribe rock formation. Light crude flowed from its Sarqala-1 exploration well at a stabilised rate of 6,000 barrels per day (bpd) over a 24-hour test period, the company said. The well did not require stimulation and no water was produced with the oil.

"We're very excited to confirm an oil discovery in the Jeribe formation. With these encouraging initial results, we will continue the testing to evaluate the full flow capability at the well and its potential for early production," said Simon Hatfield, the chief executive of WesternZagros.

The new oil strikes are the second and third this year in the semi-autonomous Kurdish region of north-east Iraq.

In April, the US oil firms Aspect Energy and Marathon Oil found oil with their Altrush-1 well, about 90km north-west of Erbil, the Kurdish regional capital. Flow rates of 6,000 bpd were established during tests, the companies said.

All the operators have signed production-sharing contracts with the Kurdistan regional government. But those agreements are at the centre of a protracted dispute between Erbil and Baghdad that continues to cloud the outlook for sustained crude exports from the region and whether foreign oil producers will get paid.

Nevertheless, Iraq's oil ministry is under pressure to deliver substantial incremental oil exports and may need to accommodate the Kurds to meet near-term targets, analysts say.

The new discoveries could bring an increased sense of urgency to negotiations aimed at unlocking the impasse.

A "grand bargain" with the Kurds was at the heart of a political deal to return the Iraqi prime minister Nuri al Maliki to power last year, after indecisive national elections left Iraq without a government for months.

The Kurdistan regional government's price for supporting Mr al Maliki was understood to have included recognition of the region's autonomy over its natural resources, especially oil and gas.

That would entail recognition of the regional government's right to issue oil and gas contracts within its territory on its own terms.

In February, analysts took the re-start of Kurdish oil exports, which had been suspended for more than a year over the dispute with Baghdad, as a sign that the grand bargain had started to function.

Only two Kurdish oilfields, the Tawke field operated by the Norwegian firm DNO International and the Tak Tak field developed by Turkey's Genel Enerji and China's Sinopec, are pumping crude for export. DNO, which is 30 per cent owned by the private Ras al Khaimah company RAK Petroleum , received its first payment for oil from Iraq's finance ministry last month. But it is still unclear whether the producers will be allowed to earn a profit or will merely be reimbursed for development costs.

Even without such an agreement, analysts have interpreted the recent developments as a sign of improving relations between the Kurds and Baghdad, pointing to an eventual resolution of their dispute. Crucially, that would allow the passage of a long-stalled Iraqi federal oil law, which many consider essential to the orderly development of Iraq's vast oil potential.

Standing in the way of such legislation, however, is Dr Hussein al Shahristani, the Iraqi deputy minister for energy issues. Dr al Shahristani has stuck to his view that all Iraqi oil contracts should be subject to central government approval - a position the Kurds find unacceptable. In his previous role as Iraq's oil minister, he declared the Kurdish oil contracts "illegal".

OMV has stakes in five Kurdish oil and gas exploration blocks. It also has a 10 per cent interest in the region's Pearl Petroleum gas development project, led by Sharjah's Crescent Petroleum and Dana Gas.


Khaleej Times Online > REGION
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Attack hits oil tank in southern Iraq

5 June 2011
BASRA - Pumping was halted at one oil storage tank in Iraq’s southern oilfields after an attack ignited a fire there, sources said on Sunday.

It was not immediately clear whether the early Sunday attack had affected exports, but firefighters were controlling the blaze after the tank near Zubair oilfield was hit either by a rocket or a bomb, police and oil industry sources said.

Crude is stored in the tanks before being pumped to the country’s Al Fao port for export.

Violence in Iraq has eased, but the country’s oil infrastructure is still the target of attacks, hampering the government’s efforts to build up production and exports. Current output is about 2.7 million barrels per day.


Gas deals make progress

Kogas has initialed the disputed Akkas deal, and the Siba and Mansuriya contracts will be finalized Sunday, though Shell’s Basra venture continues to languish.
Representatives from the Korean Gas Corp. attend a signing ceremony for the Akkas gas field on Feb. 24., an event which was derailed by last-minute disputes with provincial leaders over the contract terms. The Akkas deal was finally signed Wednesday in a closed-door ceremony at the Oil Ministry. (BEN VAN HEUVELEN/Iraq Oil Report)
By Ben Lando and Staff of Iraq Oil Report
Published June 1, 2011

In a closed-door signing ceremony on Wednesday, Iraq’s Oil Ministry initialed a long-delayed deal with the Korean Gas Corp. (Kogas) to develop the Akkas gas field in Anbar province, and announced that two other gas field development contracts will be finalized on June 5.

Oil Ministry and company officials said that Iraq’s Cabinet has approved the contracts to develop the Siba and Mansuriya gas fields, paving the way for those deals to be signed on Sunday. Meanwhile, the Akkas deal will no...


Kuwait to Offer Guarantees on Port Project?

Posted on 30 May 2011. Tags: Al Fao, Al Faw, Al Faw Grand Port, Grand Faw, Iran, Kuwait, Mubarak, Ports

Pages: 1 2
Kuwait to Offer Guarantees on Port Project?

Teh Arab Times reports that Kuwait is ready to sign an agreement with Iraq to guarantee that the Mubarak Al-Kabeer port project will not hinder the construction of Iraq’s Grand Faw port.

According to the Director of Information at the Iraqi Ministry of Foreign Affairs, Aous Al-Tamimi, the Iraqi Minister of State for Foreign Affairs Ali Al-Sajri held a meeting with the Kuwaiti Ambassador to Iraq Ali Al-Momen to discuss issues of mutual interest, during which they deliberated the construction of Mubarak Al-Kabeer port and its effects, where Al-Momen assured that the project will not affect Iraq’s port project, or its regional waters.

Meanwhile, Al-Momen had indicated readiness to sign an agreement to allay their fears, and went ahead to present some maps and aerial photographs of the location which showed the two projects are 20 kilometers apart. The two countries stand to gain economically, so they agreed to set up a joint technical committee to resolve the issue, whereas a high-powered delegation from Iraq, involving ministers, lawmakers and experts will soon visit Kuwait for further talks on the project.

In the wake of campaign by Iraq against the construction of Mubarak Al-Kabeer port, and statements issued by Iraqi MPs, the Director of Consultative Studies at Kuwait’s Ministry of Public Works, Sorour Al-Otaibi, has stated that almost 48 percent of the work in the first phase of the project has been completed, reports Al-Anba daily.

Speaking to the daily, Al-Otaibi noted that work is uninterrupted at the port. Also, Engineer Mohammed Jouma’a explained that the bridges for cars and railways will be completed in the next phase of the project, indicating the execution of around 75 percent of work.

Al-Seyassah daily, quoting journalist and Iranian file researcher Aisha Al-Rushaed, says the presence of three million Iranians, who obtained Iraqi citizenship and control South Iraq, seems to “prove allegations on Iran’s plan to annex this part of the country”, which shares borders with Kuwait and Saudi Arabia.

In a recent press statement, Al-Rushaed warned the Iraqi lawmakers against issuing statements on Kuwait’s intention to construct the Mubarak Al-Kabeer Port. She believes the tension with Iran may have clamed down for now, but it can escalate again anytime. She said the influence of Iran in Iraq has aggravated the situation – an indication that Kuwait is currently facing serious danger, especially with regards to the maintenance of sectarian balance in the society.

Al-Rushaed added Iraq or Iran can exploit the sectarian conflict in Kuwait, asserting that the security, financial and legal crises, as well as the destruction of infrastructure and allegations on its plan to jeopardize the economy through the construction of the port will negatively affect relations between Kuwait, Iraq and Iran.

(Source: Arab Times)


Iraq Law Alliance insight to doing business in Iraq
The potential business opportunities in the reconstruction of Iraq are very significant, especially for the construction industry. In this interview with Phil Blizzard, at MEED's Arabian World Construction Summit, the procedures for conducting business in Iraq are highlighted by Thomas Donovan, Managing Partner, IRAQ Law Alliance who states that these procedures do vary between the two jurisdictions of the country.

Interesting that Goldman are using SOTP (Sum Of The Parts or Embedded Valuation) Methology in valuing DNO .. some people have questioned how you would value a company like GKP.

SOTP = Net Asset Value (NAV) + Present Value Of Future Profits (PVFP)

Spidey's calculator only values GKP on the first part NAV ... it will be interesting to see the affect on the share price when exports and revenues start and we see value in the PVFP which surely must be zero at present

Matty; This seems illogical to me. The NAV of GKP is a risked current valuation of the OIP and to me in words is; 'The guess of how many barrels of oil & gas equivalent in the ground' x 'a value for each barrel taking into account guesses for future price barrel, risks, time, costs'. 'The Present value of future profits' is a monetisation over time of this NAV with likely costs and a DCF applied. The semantics aren't important - my point is that you cannot double account the NAV and FP as they are basically the same thing in an E&P company. Perhaps this is why I don't work for Goldman... Would appreciate agreement/refutation as I'm confused.


The recent signing of gas supply between Shahristani and the EU,annoyed both Turkey and Kurdistan.Nabucco will not be a reality without Turkey as a partner.

Both Kurdistan and Turkey are determined to get Nabucco going.We cannot deny the fact that all Kurdish oil and gas exports eventually will have to go through Turkey and an oil pipeline sooner than later makes good economical and political sense!

We cannot deny the fact that exports have happened and DNO paid costs oil.That as posters we will never be able to agree of many matters related to politics and our opinions will always differ!

But what is clear to me is that drilling operations in Kurdistan is proceeding at full steam,all new monies raised for Kurdistan operations from the capital markets have been fully subscribed and that exports will be ramped up to 200K barrels per day by year end.

What then are the Kurdish position?

1.That the passed their own Oil and Gas Law before awarding PSC contracts and Iraq has yet to have an Oil and Gas Law.

2.That awarding PSC contracts is the legitimate right of the KRG and that they are semi-autonomous,still being part of the Iraqi Federation.That new concessions will have to be bidded,rather than negotiated,a very sticky point with Shahristani!

3.If we look at Barzani's recent interview,the referendum to determine whether Kirkuk be part of Kurdistan,whilst it is still part of Iraq,is not for compromise and must be implemented as part of the Iraqi Constitution,when Kurdistan rejoined Iraq in 2003.

4.That the new ties between Turkey and Kurdistan,will see Nabucco happen and a new oil pipeline from Kurdistan to Turkey.

5.That we will see more oil companies taking up new concessions in Kurdistan.

Whilst the KRG and Baghdad may have valid points,but when it comes to politics and power,logic and sensibility may not prevail!!

The KRG will and not give up their right to Kurdistan,make no mistake with that and that most oil revenues from Kurdistan will go to Baghdad.But given time,the KRG will probably be much better off having their own oil pipeline whilst most revenue still goes to Baghdad,they will not be subjected to political ransom by Baghdad.

Whilst the Ceylan pipeline needs replacing, Nabucco is solely for Natural Gas .. it wont transport any oil as far as I am aware.

The current plans for Ceylan were signed last September between Iraq and Turkey. Currently it is a twin 30 inch pipeline that can handle up to 1.65 million barrels although its running at 450,000 currently. An upgrade will see a capacity of 2.5 million barrels per day.

There are plans to build 3 pipelines to Syria, 2 Oil and 1 Gas

And a plan to build an oil pipeline to Jordan but these are nowhere near as big as the one to Turkey.

Nabucco could also run right down to Basra if Baghdad get their way .. see link


Clifford Chance are a quality legal firm with a strong reputation in the region which they would obviously not want to ruin by backing the wrong horse

Aren't they the firm that has also taken up the Excalibur claim?

TT2 -is that a question from an overconfident ramper?


Bear in mind that the Clifford Chance legal opinion was written for the KRG.

I do, the KRG are one of two parties to the contract - the ICG are NOT.

It sets out the case in support of the KRG position. What it does not do is to explore the contrary position.

What is the contrary opinion - apart from your's which appears groundless, I haven't read a contrary opinion. If you mean Sharistrani, he is not party to the contract.

Other published articles are simply a regurgitation((medicine) Reverse circulation of blood in the heart due to defective functioning of the valves.
(physiology) Bringing back into the mouth undigested food from the stomach. ) of the Clifford Chance opinion and do not add any weight to it. Wrong. The opinions I have read give reasoned arguments to support Clifford Chance AND draw their own conclusions based on their knoweledge of International law and Iraqi politics.

Read the Iraqi constitution for yourself - it's pretty clear! I don't need to when I can read professional legal opinion of that quality. I could compare it to your's, but that would serve no purpose.

Accordingly, welcome to my plank list!

“Ambassador Jeffrey is working hard to establish an American Chamber of Commerce in Iraq, which would be another powerful advocate. Where we have American Chambers, we find they are very value-added. So we think that’s an incredibly important effort. And as President Obama has said, the greatest untapped resource in the Middle East and North Africa are its people. There’s no doubt about that. And we want to see Iraq have a strong democracy and a growing economy that provides stability and prosperity for the Iraqi people, and we need to work to make sure that the investments are there that will help Iraq chart that kind of future.



Energy & Natural Resources - Iraq

Debate continues on the legality of Kurdistan's petroleum contracts

June 06 2011


Several recent events have prompted a return to the lingering debate over the legality of the production sharing contracts entered into by and between the semi-autonomous Kurdistan Regional Government (KRG) and around 35 private international companies over the past few years. The KRG, through its own Ministry of Natural Resources, is adamant that the signing and negotiation of contracts for any 'new' petroleum developments (ie, those taking place under the 2005 Iraqi Constitution) remains its sole responsibility, and not that of the federal Iraqi government.

The current federal government in Baghdad, under the new minister of oil, Abdul Karim Al Luabi, has signalled a significant departure from previous policy, which was insistent that all petroleum policy be derived and managed by the federal Iraqi Ministry of Oil. Since assuming power in the new Iraqi government on December 21 2010, Al Luabi has made public statements confirming the legality of the production sharing contracts under Iraqi law, allowed Kurdish petroleum to be exported through Iraqi national pipelines and remitted payment to international oil companies operating in Kurdish fields under the contracts.

Many commentators have argued that Al Luabi's recent acts are conciliatory in nature and a realisation of the authorities that numerous international oil companies are already operating in Kurdistan despite Baghdad's attempts to derail the process. Other commentators assert that provoking the Kurdish bloc with a significant legal dispute will lead to further domestic political instability and increased calls for independence by the KRG.

Notwithstanding these considerations, the debate over the legality of the Kurdish production sharing contracts is grounded in an analysis of the division between federal and regional authorities in Iraq. The division is apparent in the notions underlying both the 2005 Iraqi Constitution and Iraqi law as applicable in the Kurdistan region. Previous pronouncements by the Ministry of Oil in Baghdad to the effect that the majority of the contracts were illegal or unconstitutional under Iraqi law appear difficult to support under close scrutiny. Instead, there appears at least a modicum of justification to the position that the future development and application of petroleum policy in Kurdistan remains under the sole jurisdiction of the KRG.

'Present field' v 'future field' distinction

The constitution allocates any power that is not reserved exclusively for the federal government to the regional or governorate governments and gives priority to regional or governorate laws where there are disputes over power-sharing.(1) Federalist notions were enshrined to the effect that no law may be enacted that contradicts the Iraqi Constitution or a part of any regional constitution, or any other legal text that contradicts the Iraqi Constitution.

In examining the language of the Constitution, a clear distinction is made between 'present fields' (which are to be jointly managed between the federal government and the semi-autonomous regions) and 'future fields' (for which the authority to manage is omitted from the constitution). Based upon the federalist notions within the same Constitution, if the power is not specifically reserved for the federal government, then the authorised semi-autonomous regions may exercise jurisdiction. Petroleum activities are not among the list of powers reserved exclusively to the federal government of Iraq under the Constitution and may therefore be governed by the KRG. The following table outlines the division of powers between the 'regional powers' (elucidated in the 2005 Constitution as a 'regional power' or a 'shared power', which is today applied to the KRG).

Exclusive powers of the federal government

Shared powers

Regional powers

No exclusive authority in relation to petroleum (under Article 110 of the federal Constitution) Petroleum extracted from present fields and strategic policies for petroleum development (under Article 112 of the federal Constitution) Anything not listed as an exclusive authority in Article 110 of the federal Constitution

Federalist debate

Article 110 of the Constitution contains the list of powers reserved exclusively for the federal government in Baghdad, and this list does not include petroleum activities. Article 112 establishes shared jurisdiction in certain petroleum matters by requiring that the federal government and the relevant region jointly manage extracted petroleum from 'present fields' and formulate strategic policies for petroleum development. Article 115 allocates any power which is not reserved exclusively for the federal government to the regional or governorate governments, and gives priority to regional or governorate laws where there are jurisdictional disputes over power-sharing.

Article 121 (Paragraphs 1 and 2) reinforces the division of powers, as follows:

"The regional powers shall have the right to exercise executive, legislative, and judicial powers in accordance with this Constitution, except for those authorities stipulated in the exclusive authorities of the federal government (Article 121 Paragraph 1); and,

In case of contradiction between regional and national legislation in respect to a matter outside the exclusive authority of the federal government, the regional power shall have the right to amend the application of the national legislation within that region (Article 121 Paragraph 2)."

Given the distinction in Article 112 between 'present fields' and 'other fields', the division of powers in Articles 110 and 115 and the primacy of regional power in Article 121, the legitimacy in asserting control over undiscovered fields located within the Kurdistan Region appears to lie with the KRG, rather than the federal government.

Kurdish petroleum law

Looking to capitalise on this reading of the Iraqi Constitution, the KRG passed the Oil and Gas Law of the Kurdistan Region – Iraq (22/2007). In Article 1 (Definitions), 'current field' and 'future field' are defined as follows:

"Current Field: a Petroleum Field that has been in Commercial Production prior to 15 August 2005;

Future Field: a Petroleum Field that was not in Commercial Production prior to 15 August 2005, and any other Petroleum Field that may have been, or may be, discovered as a result of subsequent exploration."(2)

To further legitimise the claims of the KRG, Article 2 of the same law states:

"Second: Pursuant to Article 115 and paragraphs (1) and (2) of Article 121 of the Federal Constitution, no federal legislation, and no agreement, contract, memorandum of understanding or other federal instrument that relates to Petroleum Operations shall have application except with the express agreement of the relevant authority of the Region."

As the 2005 Constitution does not specifically reserve the power to issue an oil law as an exclusively federal power, the Kurdistan Oil Law may be seen as valid and has not been challenged legally.


The definition of the term 'present' in Article 112(1) is the main focus of the argument that the Kurds will present to justify control over the region's oil. As the federal government may expressly assert management over only the 'present' oil fields (the word not being defined in the 2005 Constitution), and no mention is made of 'future' oil fields, Article 115 reserves all other powers to the regions. This would appear to open the door for Kurdish control over resources which do not fall under the definition of 'present fields'. This argument is bolstered on a plain reading of Article 121 of the Constitution, which empowers regions to override federal legislation that touches on areas which are outside of the exclusive authority of Baghdad.

For further information on this topic please contact Thomas W Donovan at Iraq Law Alliance PLLC by telephone ( +964 7 901 919 425 ), fax (+20 2 760 4593) or email (thomas.donovan@iqilaw.com).


(1) Article 110, 112 and 115 of the 2005 Constitution.

(2) Oil and Gas Law of the Kurdistan Region – Iraq (22/2007), Articles 1(16) to (17)).

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Just to be clear you need to read articles 112 and 115. It is pretty clear that 112 covers discovered fields and 115 gives the regions sovereignty over anything not explicitly stated to being under the remit of the central government. Guess what....undiscovered fields aren't stated under the remit of the central government so Erbil trumpos baghdad legally
JimWatts - well, according to an international law firm they are! It's not as if they are just a few scribbled notes on the back of a fag packet!

As others have pointed out, the issue seems to be between the KRG and ICG and it's all about compromise and face-saving. There are now over 40 international companies operating in Kurdisatan under PSCs, having spend hundreds of millions of dollars, if the ICG were to challenge them (or even some of them), that would send the wrong message to these companies and set relations (and oil revenue) back years.

I'm not saying it can't happen, because we should encourage discussion about everything good and bad, but I would put the chances of the ICG cancelling/annuling the contracts at about 1% personnally. Just my opinion, thats all.

Although Sh has some good points basiclly he is a Control Freak who wants to rig all the control in the ICG favour . --He also wants to be a future PM.

After the past centuries history for the Kurds you can really see why they dont want to give control over the best asset they have ever had to those who have within the last 20 years been seeking to exterminate them!!!!!!!!

The Prize is so large the Kurds would be mad to let it slip from their grasp.

The issue of Kirkuk is also central to their aspirations and would certainly restore the border of Kurdistan without the "arab enclave" of Kurkuk which was imposed on them by saddam and continued after 2003 by the lack of foresight of the Bush era.

It maybe doesnt help us in the short term -- but in the longterm the fortunes of GKP are inextricably linked to the advancement of the Kurdish autonomous region.

With Kirkuk oilfield in decline it maybe easier for the issue of article 140 to be resolved if the ICG dont feel they are losing a precious asset.

Shahrastani has been very busy giving his version of the story to the press. His version sounds as if Maliki has signed on the 19 point agreement without even seeing what is in the kurd PSCs.

It is time to hear the kurd side of the story and then we'll get a better idea of whether kurds are really unwilling to share the PSCs with ICG or if there is more to this than what Shahrastani is talking about.


For those that haven't seen the unedited version of the Sharistani interview, it is well worth watching (posted by Spikey who many have on ignore).


Firstly it is important to note that the interview took place on 25 May and we have seen edited highlights already, but I had not seen the full version which slightly shifts my view of Sharistani and the overall stand off with the Kurds.

I have to concede that he speaks a lot of sense throughout the interview and I think we need to acknowledge that we get whipped up into a frenzy over this guy all too readily ...I'm not suggesting sainthood however!

The interview was after the date of the payment to the KRG, but obviously before the payment of that money to DNO. Sharistani makes it clear that the payment so far is an initial payment pending receipt of the invoices for capital costs by the IOM. He makes it clear that they have not received such invoices and infers that the payment is based upon the figures they have received from the KRG based upon their review of the invoices. It is apparent that there is a further reconciliation exercise to be conducted once the receipts are handed over, which could lead to the IOM paying as much again towards capital costs i.e. 100% of the costs.

Secondly, in relation to the contracts he states that the Kurdish PSCs have not been shown to the IOM therefore they are not approved and he questions their legality (admittedly from a constitutional viewpoint, there may be a rational case for a gripe by the Kurds on the question of legality). He therefore states that the IOM (probably quite rightly imo) is not bound by these contracts - how can a party be bound by a contract to which it was not privy - therefore the payments to contractors in Kurdistan will only cover capital costs, the clear implication being that this might change if the KRG would hand the contracts over for review. The payment of capital costs is of course consistent with the TSC contract which the IOM prefers.

So, in view of the above, it would appear that the payment of full capital costs is being hindered by the KRG holding back on the invoices, and that
progress with ratification of contracts is also being blocked by their unwillingness to let the IOM see them. My question is why would the KRG do this?

Questions are also asked about the $2 per barrel TSCs which are held by the IOCs in the South of Iraq and whether he thinks they should be amended. His answer on this seems perfectly correct ...they were subject to competitive bidding and it is hard to see how that is unfair. He does however acknowledge that the production plateaus could be amended to allow better cashflow for the companies involved. Not unreasonable?

Sharistani also refers to the next bidding round and openly recognises the difference from the last round as the next one is for exploration rather than production. In view of this, I can not see anything to suggest that he thinks payments for exploration contracts will be at the same rates per barrel (or equivalent for gas) as the $2 in the last round ...that is just scaremongering and total paranoia on the part of PI's in my view.

Finally, he talks about the Oil and Gas law and the fact that it needs to be substantially amended to reflect the contracts which have been put in place more recently. He has no idea how long this might take but seems totally unconcerned. My conclusion is that he sees the existing contracts as being the key determinants in the new legislation ...so why shouldn't that include the Kurdish PSC's? It strikes me that if the KRG would just get on with discussing the detail of the PSCs with the IOM, we might find that they are ratified (or amended on an acceptable basis) without any need to wait for this infernal Oil and Gas law.

Apologies if I am missing some key points in this debate, but I am coming to the conclusion that Sharistani might have some very legitimate points!


11 Jun 2011
RAK Petroleum Chairman Elected New Chairman of Norwegian Oil Producer DNO

OSLO, 11 June, 2011--Shareholders at the DNO International Annual General Meeting held today in Oslo elected Bijan Mossavar-Rahmani as the company's new Chairman. Mr. Mossavar-Rahmani is Chairman of the Board and CEO of RAK Petroleum Public Company Limited, the Middle East based independent oil and gas exploration and production company, which is DNO International's largest shareholder with a 30 percent stake. Mr. Mossavar-Rahmani was elected to the board at an Extraordinary General Meeting held on 10 March 2011.
Three other current directors, Gunnar Hirsti, Marit Instanes and Shelley Watson, were also re-elected as directors and Karen Sund, Founder and Chairman of Sund Energy AS, an Oslo-based energy consulting firm, was elected as the only new independent director. Mr. Hirsti is the Company's new Deputy Chairman.

"DNO International has a solid foundation in assets and importantly, in people," said Mr. Mossavar-Rahmani. "We believed this as we acquired our large position in the company and we believe it today as we take a more active role, in collaboration with shareholders, directors and management, to stabilise DNO International and then drive it to realise its full potential," he said.
"The operations group is first rate and the speed with which discoveries have been brought on production is truly impressive," said Mr. Mossavar-Rahmani. But he emphasized the need to bring best practices to the company in terms of governance, transparency, accountability, cost control and regulatory compliance while improving its relationships with host governments.

Mr. Mossavar-Rahmani acknowledged the service of the outgoing director.


About RAK Petroleum
RAK Petroleum Public Company Limited (www.rakpetroleum.ae) is registered in the Free Trade Zone of the Emirate of Ras Al Khaimah and is operator of seven blocks in the Sultanate of Oman and the United Arab Emirates, of which one is in the production phase, three are in the exploration phase and three are undergoing appraisal for possible development/redevelopment.

RAK Petroleum also has a non-operating 30 percent interest in the Hammamet Offshore license in the Republic of Tunisia and a 30 percent shareholding in the publicly-traded Norwegian oil and gas company DNO International ASA (www.dno.no), whose principal producing properties are located in the Kurdistan Region of Iraq and the Republic of Yemen.

For more information, please contact:
Ms. Shelley Watson
Group Commercial Director
RAK Petroleum
Dubai, UAE
Tel: +971-4-293 2000

Ms. Katherine Darcy
Corporate Affairs Manager
RAK Petroleum
Dubai, UAE
Tel: +971-4-293 2000

© Press Release 2011


Fox Davies Capital
Thursday, Jun 16 2011 by Fox Davies Capital
Oil & Gas Corporate News
Gulf Keystone (BUY, £2.75)

(GKP, 145.25p, ▼ 1.69%) provided an update on its operations in the Kurdistan Region of Iraq. The company announced that the Shaikan-2 deep appraisal well is currently at a depth of 3,166m with the final total depth (TD) still planned for the lower Triassic or the upper Permian. The Sheikh Adi-1 exploration well is currently at a depth of 3,515m in the Triassic Kurre Chine B and a cased hole testing programme will be undertaken once the drilling has reached TD. After spudding on 27 May 2011, the Shaikan-4 deep appraisal well is currently at a depth of 462m. Preliminary results of the Shaikan 3D seismic data interpretation suggest a larger structure (by 5-10%) than originally mapped based on the earlier 2D seismic data. The Bekhme-1 exploration well on the Akri-Bijeel block is drilling ahead at a depth of 2,828 meters.

Mining Corporate News


Oil and energy parliamentary: We will not allow a fourth with a round licenses without the approval of oil and gas law
17/06/2011 11:58


Baghdad, June 17 (Rn) - A member of the parliamentary oil and energy, Friday, that the Commission decided not to do the fourth licensing round for oil there is no legal justification to hold them at the present time without the adoption of the law of oil and gas.

Said Furat al-Shara told the Kurdish news agency (Rn) that "the Committee on Oil and Energy has prepared a statement read at the meeting of the House of Representatives calling for the Oil Ministry to take the committee's approval or waiting for the oil and gas law in determining the date for the licensing round, the fourth."

"The Energy Commission believes that there are legal and technical problems should be addressed by the ministry before heading towards the holding of the fourth round of licensing and presentation of 12 sites for exploration by international companies."

He said, "his committee is trying to solve this problem in private meetings away from provocative speeches in order not to take advantage of the fourth round of licensing file for political purposes by some parliamentary blocs."

A commission of oil and energy in the first parliamentary May that it had requested formally by the Ministry of oil licensing round, the fourth postponement of the lack of need for Iraq in the current phase

The Iraqi Oil Minister Abdul-Karim and coffee had earlier announced earlier this month for his willingness to launch a fourth round of licenses to foreign companies dedicated to invest 12 exploration blocks in the areas of crude oil and gas.

The oil ministry had announced earlier this month it had ended for Astaadatha to do a fourth tour of licenses.

The parliamentary committee said earlier that Iraq's production of crude oil, which amounted to two and a half million barrels a day is disproportionate to the country's economic projects.

And the failure of the House of Representatives to pass Bdorth previous oil and gas law, which was expected to rise oil situation if approved.

And announced that the Iraqi Oil Ministry in September / September last year that crude oil inventories in the country was 505 billion barrels of discovered fields that $ 66 oil fields, with total recoverable reserves of 143 billion barrels of oil.

And fired the Iraqi Oil Ministry three rounds of oil licenses to invest and develop oil fields.

Plans to increase Iraq's oil exports during the next six years to 12 million barrels per day after obtaining the approval of the international oil (OPEC).

Wanan of Jafar, the Open: Peace Baghdadi


In Rebuilding Iraq’s Oil Industry, U.S. Subcontractors Hold Sway

Published: June 16, 2011

MOSCOW — When Iraq auctioned rights to rebuild and expand its oil industry two years ago, the Russian company Lukoil won a hefty portion — a field holding about 10 percent of Iraq’s known oil reserves.

It seemed a geopolitical victory for Lukoil. And because only one of the 11 fields that the Iraqis auctioned off went to an American oil company — Exxon Mobil — it also seemed as if few petroleum benefits would flow to the country that took the lead role in the war, the United States.

The auction’s outcome helped defuse criticism in the Arab world that the United States had invaded Iraq for its oil. “No one, even the United States, can steal the oil,” the Iraqi government spokesman, Ali al-Dabbagh, said at the time.

But American companies can, apparently, drill for the oil.

In fact, American drilling companies stand to make tens of billions of dollars from the new petroleum activity in Iraq long before any of the oil producers start seeing any returns on their investments.

Lukoil and many of the other international oil companies that won fields in the auction are now subcontracting mostly with the four largely American oil services companies that are global leaders in their field: Halliburton, Baker Hughes, Weatherford International and Schlumberger. Those four have won the largest portion of the subcontracts to drill for oil, build wells and refurbish old equipment.

“Iraq is a huge opportunity for contractors,” Alex Munton, a Middle East analyst for Wood Mackenzie, a research and consulting firm based in Edinburgh, said by telephone.

Mr. Munton estimated that about half of the $150 billion the international majors are expected to invest at Iraqi oil fields over the next decade would go to drilling subcontractors — most of it to the big four operators, which all have ties to the Texas oil industry.

Halliburton and Baker Hughes are based in Houston, as is the drilling unit of Schlumberger, which is based in Paris. Weatherford, though now incorporated in Switzerland, was founded in Texas and still has big operations there.

Michael Klare, professor of peace and world security studies at Hampshire College and an authority on oil and conflict, said that American oil services companies were generally dominant both in the Middle East and globally because of their advanced drilling technology. So it is no surprise, he said, they came out on top in Iraq, too — whatever the initial diplomatic appearances.

United States officials have said that American experts who advised the Iraqi oil ministry about ways to restore and increase petroleum production did so without seeking any preferences for American companies.

And immediately after the 2009 auction round won by Lukoil, the United States Embassy spokesman in Baghdad, Philip Frayne, told Reuters that “the results of the bid round should lay to rest the old canard that the U.S. intervened in Iraq to secure Iraqi oil for American companies.”

But Professor Klare said that the American officials who had advised the Iraqi government on its contracting decisions almost certainly expected American oil services companies to win a good portion of the business there, regardless who won the primary contracts.

“There’s no question that they would assume as much,” he said.

The American oil services companies, which have been in Iraq for years on contract with the United States occupation authorities and military, are expanding their presence even as the American military prepares to pull out.

For example, Halliburton, once led by former Vice President Dick Cheney, has 600 employees in Iraq today and said in a statement that it intended to hire several hundred more before the end of the year. “We continue to win significant contracts in Iraq, and are investing heavily in our infrastructure,” Halliburton said.

The 11 contracts Iraq signed with oil majors, including the six for the largest fields, are intended to raise Iraqi output from about 2.5 million barrels of oil a day now to 12 million barrels daily in 2017. Some of the oil services contracts are for repairing currently productive fields, others to tap mostly unused sites.

Russian Oil Company Lukoil Seeks Re-Entry to Iraq,planning to invest $3.5 billion
Written by Charles Kennedy
Friday, 17 June 2011 01:35

Russia, blindsided by the March 2003 U.S.-led invasion, is seeking to revive previous Iraqi opportunities.

Excluded from Iraq by the U.S.-led March 2003 invasion, Russia’s Lukoil is planning to invest $3.5 billion in Iraq’s West Qurnah-2 deposits by 2013.

Russian Natural Resources Minister Iuri Trutnev announced the investment following discussions with Iraqi Oil Minister Abd-al-Karim al-Lu'aybi.

If all goes according to plan, Lukoil hopes by 2018 to be extracting 95 million tons a year at the West Qurnah-2 field, Interfax news agency reported.

In 1997 Lukoil obtained the right to develop West Qurna-2, with an estimated 6 billion barrels of recoverable reserves.

Development never occurred, first, because of U.N. sanctions over the arrangement with the regime of Iraqi President Saddam Hussein and then after March 2003 because and later because all agreements made under Hussein’s regime were cancelled under the new administration. Prior to cancellation of the agreement Lukoil brought a number of Iraqi engineers to western Siberia for training.

By. Charles Kennedy, Deputy Editor OilPrice.com


But there is little question that production is ramping up. On average in 2002, the year before the United States invasion, Iraq produced only 1.9 million barrels of oil a day.

Lukoil’s experience in Iraq shows how, while geopolitics steered the primary contracts largely away from United States oil companies, the process left the subcontracting wide open for American service providers.

Lukoil was originally granted rights by Saddam Hussein, in 1997, to develop a huge field called West Qurna 2 — rights that Mr. Hussein rescinded just before the war began in 2003.

After the invasion, Lukoil sensed that its best chances lay in working with the Americans. It formed a joint venture with the United States company ConocoPhillips, giving Conoco a small venture in the Russian Arctic and ceding it part of West Qurna 2.

By the time Lukoil was eventually compelled to bid again for the field at the 2009 auction, sentiment in both the United States and Iraqi governments seemed to have shifted to favoring non-American companies in awarding the main contracts. But one of Lukoil’s first steps after securing the West Qurna 2 deal was to subcontract the oil well refurbishment work to Baker Hughes.

While Baker and its American peers are poised to make significant profits from such work in Iraq, wafer-thin margins seem to await Lukoil and the other international oil producers — which include BP of Britain, CNPC of China, ENI of Italy and the Anglo-Dutch company Shell.

Lukoil’s contract, for example, is typical in paying a flat fee of $1.15 for each barrel produced, regardless of oil’s price.

That means even if Lukoil ramps up West Qurna 2 production from almost nothing now to 1.8 million barrels a day by 2017, as specified in the contract, it will require more than a decade of subsequent production just to recoup capital costs of about $13 billion. A good portion of those costs, meanwhile, will have gone to its drilling contractors. Lukoil says it intends to drill more than 500 wells over six years.

Lukoil and other winners of the 2009 auction are now quietly seeking to renegotiate the deals by slowing the upfront investment. On Wednesday, Lukoil executives met with Iraq’s oil minister in Moscow, the company said in a statement. A spokesman declined to provide more details.

Andrei Kuzyaev, the president of Lukoil Overseas, the company’s subsidiary for foreign operations, said in an interview that he was choosing oil services contractors in Iraq through open tenders, as required by the contract. But in fact, Lukoil officials say privately, only American companies have bid.

“The strategic interest of the United States is in new oil supplies arriving on the world market, to lower prices,” Mr. Kuzyaev said.

“It is not important that we did not take part in the coalition,” he said, referring to the military operations in Iraq. “For America, the important thing is open access to reserves. And that is what is happening in Iraq.”


an interesting time to release this article just before close of play on Friday, before the markets have a chance to digest the contents, and one day after the AGM.


It certainly gives us the weekend to consider its contents, so that has to be a plus! And at first glance, there are TWO notable extracts:

1. “GKP estimates Shaikan’s PROVEN RESERVES are at least 5 billion barrels”
2. “Estimates of OIL IN PLACE run to more than 10 billion barrels”.

So, no chance of the reporter, Nassir Shirkhani, getting what is OIP and what is Reserves confused like so many do! Indeed, some of you might remember that he produced 3 articles for Upstream Online about GKP on the same date, 10 September 2010, so he definitely knows GKP and the oil business very well!

Now, let us consider those 2 statements in his latest article...

Based on the latest presentation, and GKP’s estimated recovery rate of one-third referred to in that presentation, there would need to be 15 BILLION OIP to give the 5 BILLION RESERVES figure.

And looking back at the 14 April RNS – Shaikan Oil in Place revision, we see:

“The revised gross oil-in-place volumes for the Shaikan discovery, as calculated by Dynamic Global Advisors (DGA), independent Houston-based exploration consultants, are a P90 value of 4.9 billion barrels to a P10 value of 10.8 BILLION barrels of oil-in-place with a mean value of 7.5 billion barrels and a P1 value of 15 BILLION barrels.”

So, TWO MONTHS LATER, we read of 5 billion reserves and more than 10 billion OIP.

The question is then ... Are we now looking at the P10 value (or even the P1 value) as GKP’s new OIP estimate for Shaikan, and a further huge OIP upgrade that is just about to be announced?

Enjoy the weekend everyone – next week could be very exciting indeed.

GLA, scaramouche


Now, now Opti – Don’t be cruel. I’m All shook up at the moment after GKP’s recent SP performance and, to be quite honest, it’s Always on my Mind!

I still believe that for, those thinking of getting in to GKP, it’s Now or Never! Just treat here everyone with Suspicion... and as for that Zen... remember he is really the Devil in Disguise.




Thanks to all who contributed.

Attending this years AGM has been well worth the effort in many aspects.
Meeting Invester48, theperpetualoptimist, Sea Bass 1916, FiFiGiGi, Carlos Alberto70, Gramacho, and others.

IMHO, the recent drop in the SP over the last weeks, was because of Resolution 7 being annouced in the first place, and some closings of large CFD positions.
Thursdays passing of Resolution 7, and subsequent further fall, IMHO, further reinforces that thought, as further large positions where closed, probably relating to the 0.25% requirement to disclose to GKP.
Once those have been absorbed by the Market, we may start to see a rise.

As for the Back in Rights that are held by the KRG. Here is my take on them.

I tend to look at the BIR's being just like a "Farm In" that other small Oily's do, but enforced by the KRG, rather than a requirement by a small Explorer called GKP as an aid to Funding issues.

I imagine that the KRG are now in a bit of a quandry, as from memory, Shaikan cost GKP under $30,000,000 for their percentage. (can be checked in the 2008 Yearly Accounts)

So, what if it was GKP that was to "decide to offer a Farm In of 15% of Shaikan", then what price would GKP set on the Farm In, and what of the MOL BIR's.
Page 28, and the rest, which would require someone with better skills than me to get the price out of the Accounts.

$250,000,000 or $500,000,000, or even $750,000,000, take your choice, but thats the choice of the KRG, so how will the KRG Value Shaikan.
Will the price be with the blessing and sanction of the ICG. Now there's a thought.

I look at the Price for the BIR's (Farm In), being based on the Value of Shaikan from known Data by the 30th June.
The Data required, do we have it, IMHO, I think GKP have more than enough.

Nethen, I have never known 3D Seimics being undertaken by a small Explorer (or unusually done so early in an Oil Field Exploration, being so expensive) (and remember that one of the Top 3D Seimic Companies in the World where Employed to do it, one TerraSeis).

Plus we have had Ryder Scott brought in to confirm DGA's findings.

Now who the heck employs two of the Oil Industries "Largest Heavy Weights", without good Reason, and all before the 30th June, and the BIR's being handed out.

My best guess as to those reasons, can only be to raise the price of the BIR's, and who has the money to afford them.
Well, we know KNOC has been muted as to getting them, and they have a pot load of money in the $billions for just such aquisistions, but are there others out there. Will a bidding war start for them. That would be fun if it did.

Plus we have the astute Baillie Gifford gaining 13,064,853...1.71% by the 1st March, and they have since raised their holding over the last 3 months by 7,000,000 to 20,240,407...2.66%. Now they ain't daft.

I can only see all arrows pointing at the 30th June.

IMHO, it does not even matter whether we get to know the price, though it will be nice if it slipped out somehow.
So all eyes on the KRG, ICG, and KNOC WebSites after the 30th June.

Nice to be back having a decent cup o char.

GLA, the trip has been our pleasure. Mikey.

PS. I'm not convinced on the Profit Oil being over 10% "less" the 40% Infrastructure Payment, IMO, more like including the 40% taken out. But thats My Opinion only.


If the KRG end up with a 15% stake in Shaikan and stakes in other fields then they will get *more* than the negotiated 17%.

All Oil revenues go to the ICG, which they share out to the regions by percentage based on Population, makes any percentage the KRG holds, as BIR's, IMO irrelivent.

The way that the KRG are gaining extra revenue is by way of the Infrastructure Tax not the 15% BIR's, which Taxes each Oil company after the KRG gets paid, which the ICG think should be shared around all Regions.
The KRG's arguement IMO, is that Kurdistan has been under Funded for so long, and would have remained so if they had taken no action, that they deserve the Infrastructure Tax.

IMHO, thats the sticking point with the ICG, as it leaves the door open for other Regions to do the same.

Imagine that the Southen Oily's got their payments paid to Basra, who then taxed it and paid it out, or Scotland got the Payments for the North Sea Oily's taxed them and then paid them.
Thats what the ICG want to stop happening, so the fact that the KRG received the Payments which they pass on to the Oily's, after the Infrastructure Tax is removed, shows IMO that things are moving the right way.

For that matter, if the KRG hold stakes in some fields how does that tie in with the 17%

The 17% that the KRG get from the ICG should be related to the Population of Kurdistan. (it was said to drop to 15% before agreement was made to remain the same)

For the present Budget, as there had been no Census done, so could not be correctly priced percentage wise, they left the percentage at the 2010 level.

If and when the Census is completed, I expect Kurdistan will get its propotional percentage of the Iraqi Revenues based on Population.


Gould dust: Andrew Gould-led Schlumberger wins large drilling deal in Iraq
US contractor giant Schlumberger has bagged a large drilling deal in Iraq from a consortium led by Russia’s Gazprom Neft.

Eoin O'Cinneide 20 June 2011 13:25 GMT

The value of the contract to drill 11 wells at the Badrah field has not, however, been disclosed by the Moscow-based oil giant.

NYSE-listed Schlumberger will drill the wells over a three-year period at the field, south-east of the capital Baghdad.

The consortium - led by oil giant Gazprom Neft but also including Petronas, Kogas and Turkish Petroleum (TPAO) – has its eye on drilling a total of 17 wells at the field by 2017. It is not clear from today’s announcement, however, if Schlumberger has retained options for the six remaining wells.

Drilling of the first batch of appraisal and development wells is expected to be completed by early next year but no mention was made of a first spudding date. Nobody was immediately available for comment at Gazprom Neft while Schlumberger has yet to announce the deal.

Gazprom Neft’s deputy chief executive for exploration and production, Boris Zilbermints, wrote: “The formation of operating well stock will enable us to meet the primary objective of the consortium’s participants: to begin production at the oil deposit in 2013, as stipulated in the service agreement”.

That service agreement, aimed at developing the 109-million-barrel field, was penned in early 2010

Gazprom Neft holds a 30% stake in the consortium with Kogas grabbing 22.5%, Petronas 15% and TPAO 7.5%. The Iraqi government retains the balance of 25%.

Published: 20 June 2011 13:25 GMT | Last updated: 88 minutes ago

2011 AGM Notes and Comments

By Gramacho:

Here are notes from the meeting. Also included are comments and insights gained from reflecting on what was said. Even slower write up than usual, but now finished for posterity and GKPs biographer lol!

The only non-shareholder was a journalist representing safe harbor. It was not clear what he meant as safe harbor can refer to data protection measures. Obviously he had GKPs permission to attend and he kept a low profile.

All resolutions were passed. The maximum number of votes cast on any resolution was 178MM which is only 23% out of 762MM possible. I assume this did not include the votes from the floor. Good job we did not have a RAK/DNO scenario lol! Resolution 6, to provide the directors with the authority to reduce the share capital by repurchase of shares, had the most votes against, 45MM. There is no present intention to repurchase shares

Resolution 5 to Increase the Share Capital by 50MM New Shares
This was the only resolution that prompted any significant discussion.
It is to provide future flexibility for growth to enable it to raise capital if necessary; otherwise the bye laws require a general meeting to obtain approval to raise the capital.
Cash available was $170MM at the time of producing the recent annual report. This cash was designed for work program detailed in the announcements so far. Ewen said there are no plans to raise money at this time. We are fully funded for current program until 1/2Q 12. TK indicated growth opportunities will be assessed as they come.
The resolution passed with 174MM votes in favour out of 178MM votes cast.

Slide 2
All except members of the Board and management team were present except Chris Garrett and Adnan Samarrai due to operational matters.
There have been no changes to the management team but considerable additions to technical groups in London and Kurdistan.
Comment: The annual report shows the number of operational and technical staff more than doubled in 2010 from 53 to 106 whilst office and management tripled from 14 to 43. This is a company staffing up to handle much higher activity and be able to produce its assets.

Slide 3 Company Highlights
The initial export rate is 5k bopd increasing to 10k bopd over the next 6mo. However TK later asked JG to confirm, which he did, that Sh1 and Sh3 were capable of 15k bopd. The cash in the bank is sufficient for the current work program without taking into account forthcoming revenues from production.

Comment: Hence there may be capacity to continue production to the local market in addition to the export. If you recall there was a quarterly contract equivalent to about 2400 bopd announced in January. However in the later discussion TK talked about being asked to switch over to export as though this was to the exclusion of internal sales.

3-D seismic structure has grown “Shaikan keeps getting better every time we work on it”
It was confirmed Algeria is a “zero cash drain.”

Q. DNO has announced that it has been asked to supply details of its reserves and presumably contingent resources as part of a wider survey by the KRG of Kurdistan. Does that mean you have had to supply GKP figures for your blocks?
A. The survey being conducted by the oil ministry in Baghdad and is for the whole of Iraq not just Kurdistan. Every operator has been asked and we are currently working on supplying the information.

Q. So you are working in house to translate your OIP numbers to contingent resources?
A. Not necessarily, the form caters for all stages. It makes provisions for producing fields, new discoveries, prospects and reporting OIP.

Comment: It was hoped this might be a trigger for GKP to formerly announce an independent report covering reserves and contingent resources but based on GKPs response it may not do so. It wasn’t apparent at this stage that they were going to discuss preliminary management estimate for Shaikan in a later slide.

Slide 4 Shaikan
Waiting for approval from ministry to transfer the TKI interest over to GKP.
Current interest in the wells being drilled is to look for the 55 API oil that comes with lots of gas.
The test facility is being expanded.

Q. Is the new tank up and running?
A. The new tank is under contract. It will be built but it takes time as it is stick built plate by plate.

Q. BIR with 30th June deadline, is it being extended or has it been awarded?
A. There is no extension, KRG awarded the BIR to itself and these were reported by the KRG to be for sale and it was even reported KNOC is potentially successful bidder but GKP has not been notified that a transaction has been completed.

3D seismic first processing is complete, some reprocessing is ongoing.
Comment: The 3D seismic footprint map has been shown at Oilbarrel and in the June presentation. The overlap into the Komet and Hunt acreage will have provided a better understanding of how much of Shaikan spills into other blocks.

Slides 5, 6 and 7 Shaikan Size, Resources and Frontier Discovery Comparison
This was an effective attempt to step back and appreciate the scale of Shaikan alone without even considering the potential on GKPs other blocks.

Slide 6 and Todd’s comments were particularly interesting. The graph shows 2.5 Bn bbl reserves associated with the 7.5 Bn gross P50 OIP estimate and 3.6 Bn reserves associated with the P10 OIP estimate of 10.8 Bn bbl OIP. TK dispensed with the current P10 estimate and jumped straight from the P50 to the current P1 estimate. “A discovery of 2.5 Bn, even more impressive if it is moved up to 4.9 Bn” (he means 5 Bn associated with the 15 Bn bbl P1 OIP estimate). It was just like 2009 all over again, unable to contain the excitement of where he feels the Jurassic and Kurre Chine will end up once appraisal is finished lol!

Comment: This is the first time that I am aware of that GKP has explicitly stated reserve numbers. Previously there have been low key comments about an industry average recovery factor of 33% without explicitly stating management’s reserve estimate in Bns of bbls. Slide 6 suggests we are moving towards a more formal statement of contingent resources and thereafter reserves.

It is still early days to be talking confidently of recovery factors, particularly as any recovery factor is a function of an associated drive mechanism to produce the oil and information to evaluate the choice of drive mechanism has been limited. However another 77m of core has been taken in the Mus and Butmah and some of this could be used for gas injection and water injection displacement studies.

Slide 7 was very striking in that it clearly showed Kurdistan to be the leading frontier area in the last 10 years with the oil discovered in Shaikan alone outstripping the combined frontier basin discoveries most countries. The map omitted the Nth & Sth America and hence the Brazilian Santos Basin but it has limited accessibility with the plum acreage going to Petrobras.

Slide 8 Shaikan 1 and 3 EWT
GKP believes the request for export is good news, better prices, moving closer to petroleum agreements with Baghdad.

During Slide 8 the discussion moved to building an export pipeline
120km journey to the DNO facility. GKP pays the same fee/contract to use the export pipeline to Ceyhan as anyone else going through it.

Q. Which way will you go with an export pipeline west or north?
A. This is currently under feasibility study. The best route will probably be to the north. There are several wish list pipelines that have been mentioned but TK has not seen anything leave the drawing board to a practical phase.

Q. What size pipeline will we be looking to lay?
A. Once we finish the wells I can let you know. We then need to do oil and gas transportation feasibility studies in accordance with dev plan which is being worked on as well.

Q. Will other companies be able to hook into it?
A. “Not unless we charge a fee.”

Q. Could we do that to gain transport tariff revenue?
A.“We are not a pipeline transportation company and I don’t know if we could build one big enough to handle everything! Shaikan may need 2-400 k bbl/d.” He then mentioned 500k bbl/d but I did not catch the exact context, for example whether this was an upside case or with Sheik Adi or some other context.

Mikey was keen to know the cost but TK was elusive “I don’t know the size so I don’t know the cost.”

Comment: As JG alluded to earlier in the week this is one of the more complex decisions in front of GKP. As well as a strategic decision to make, i.e. capacity for Sh or Sh+SA or Sh+SA+BB (IMO you are looking at closer to 1MM bbl/d peak capacity if BB is as successful as Shaikan) at increasing cost, there is also the question of risk management and negotiating tactics. When is the right time to commit? The KRG recognises the need to increase production from Kurdistan and once Tawke and Taq Taq reach plateau rates then the scope for further significant increases in KRG production from in other fields by trucking is very constrained. The situation is crying out for a major new pipeline to achieve KRG and Baghdad goals; is this the time for field developers to have a little more leverage with the KRG regarding resolution of profit oil payments?

There was no indication that GKP is thinking of an interim solution of say a 10” pipeline to cater for say 60-80 k bbl/d which would be adequate for a limited Phase 1 development. The discussion centred on a full size line which, for Shaikan, I imagine will be 20 -24” or possibly substantially more depending on the crude’s viscosity in winter conditions and the cost trade off between line size and intermediate pumping stations.

Slide 9 Sheikh Adi
Very little discussion, O&G shows in KC and GKP has elected not to test until the hole is cased.

Slide 10 Ber Bahr
BB1 will spud by the end of year, JG indicated it should be by Aug/Sept, TK reiterated by year end. Concern was expressed that there was not much news coming out of Genel. TK responded that GKP will report as progress is made.

TK used the opportunity to address allegations of lack of transparency at GKP and lack of news flow. “We are news flow junkies, we want to read the next page/chapter of the book we are writing. But the oil industry is a “hurry up & wait” business!”

GKP has made 47 announcements in the last 52 weeks whereas Sterling has made 12 and Heritage just 8 announcements in the same period. He believes GKP is transparent. Just bear with us for the news flow which will come when there is something to report.

TK is very optimistic about BB and believes it will lead to one if not two Shaikan type discoveries. (I think he was speaking in volume terms rather than there being two structures at subsurface level.)

He was quizzed about the slower progress.
Q. Do you see a risk in not being able to realise the value of BB due to external events?
A. There is always a risk. We have a plan and we believe we can execute the plan otherwise we would not have started the plan.

Q. But you have to be around to realise the value in BB?
A. I am not aware of a take-over, we have not been approached.

Q. But to realise the full value of BB will take several appraisal wells.
A. To realise the value of any of these assets is going to take 5-10 years. We have a work plan and we are executing it but we don’t have a 5 – 10 year plan.

Q. Why the drill baby drill and race against time by two of the brokers?
A. You will have to ask the analysts.

Q. Is there a change of strategy since the November road show which was to prove up the assets and sell? Are we moving towards being a producing company or is the production being dragged out of GKP by the KRG?
A. TK –There is no strategic change in GKP.
John G We are oil people and we want to find oil and produce oil.
TK “Revenue insulates us against calling for more cash.”

Comment: This summarises the discussion. We pushed as hard as we could to get any insights into whether there is a plan to ensure full value is achieved for BB or whether there was a strategy change. Not unexpectedly TK was able to “dance around them” to use his own expression lol! However he did confirm there has not been an offer. IMO it is still too early to have the confidence to make a multibillion $ bid for GKP.

BTW did anyone notice that the anticline in the Sheikh Adi block on the version of the BB surface map in slide 10 is actually named Shaikan! Did someone with local knowledge mention this on the BB last year?

The map brings home some serious access issues for the appraisal of BB. Much of the structure within the BB block cannot be drilled with vertical holes unless drilling takes place from a barge on the lake. If barge drilling cannot be undertaken without an extensive, prolonged environmental impact assessment, some appraisal wells will have to be directional holes. This will increase the total footage to be drilled and make the already long wells even longer duration. Has Genel thought about, or commissioned, an EIA I wonder?

Slide 12 GKPs 3D Projection of the Jurassic across Shaikan/Sheikh Adi/Ber Bahr
JG discussed the upside scenario depicted. We have not seen an OWC but we have not got that deep in the Jurassic yet.
Sh 13Bn bbl OIP in Jurassic/Upper Triassic + more in the Triassic geopressured sections we are about to drill.
SA about 1/3 that size
BB potentially twice the size if OWC is at -2230m SS in that structure.

It is important to note that the DGA report (and I assume the RSC report) map of the entire Shaikan structure only overlapped slightly into Komet’s Al Qush Block. However the overlap really did not need to be considered because the report was very conservative and the DGA P10 OIP estimate could easily be accommodated within the Shaikan Block and potentially even a DGA (unpublished) P1 estimate.

However GKPs P1 Top Shaikan projection suggests there could be a substantial overlap into the Komet acreage and indeed possibly through into Sheikh Adi. This leaves open the possibility of confusion over what area GKPs 13 Bn bbl refers to. However IMO they have tried to avoid any confusion by truncating the projection at the Shaikan block boundary to indicate OIP numbers refer to the Shaikan block only.

The RNS of 23/5 indicated that cores in the Butmah in Sh-2 had excellent oil shows. Based on the Butmah being oil bearing and no OWC identified it is possible to estimate the expected oil down to in Sh-2 by two methods using interval thicknesses from Sh-1: A) Top down from the Sh-2 DST(Drill Stem Test) depth in Sh-2 and B) bottom up from the KC-A depth in Sh-2.

The range of expected lowest oil is -1650 to -1800m SS assuming the formations present in Sh-2 are similar to those in Sh-1. Sh-2 is a 9km step out from Sh-1 so there is very likely to be differences and hence the range of uncertainty is probably larger at this stage.

Hence BBSSs “Fill to Spill: Did S* Spill the Beans” post is of such interest since it predicts that SA-1 may have found oil deeper than Sh-2, close to -2000m SS, and be in communication with Shaikan if the northern fault is of low throw and not sealing. (Note his estimate has uncertainty but no time to go into that here.)

The reduction in size of SA relative to Shaikan from the previously quoted 1/2 to 1/3 could be due to a number of reasons.
•Shaikan is about 5 – 10% larger
•The reverse fault may indicate the Jurassic is deeper than anticipated in previous mapping and there is less reservoir rock volume above the OWC in the southern part of the field.
•The new ratio may factor in a reduction in initial estimates of net pay from SA-1 logs versus the net pay assumed in previous estimates.

Slide 12 Akri Bijeel Block
JG summarised the Akri Bijeel Block. GKP considers the Bijell discovery as a freebie as GKP were not believers pre-drill.

Q. Is the Bekhme-1 well almost at TD?
A. No there is well over 1000m to drill

Comment: The well was at 2828m MD at AGM ops update. However 25 Mar RNS indicated TD would be “approximately 3000m”. The Bijeel 1 well tested oil in the Jurassic at 3967m. Bekhme-1 is designed to drill the Jurassic and Triassic. Although Bekhme is up structure from Bijeel and is therefore at a shallower subsea depth, the surface elevation will be higher so you would expect a similar drilling footage. The depth to be drilled is therefore likely to be about 4000m or deeper rather than 3000m.

Slide 13 The Rig Schedule
Q. The slides tend to have the standard 6mo duration for a well and the wells have been taking longer. Are you going to start to depict a longer duration for wells on the rig schedule?
A. (JG) On SA (and Sh-1) when drilling for the 20” casing we have had to drill a 17-1/2” hole because that is the maximum size that can be logged by the Chinese logging company that we use. This has to be opened up to 24” to enable the 20” casing to be run. The Cretaceous formation is unstable when the pilot hole is drilled and even more unstable when it is opened up.
We have now decided not to run logs and drill the 24” hole at the outset. We rely on LWD (logging while drilling) and shows and have given up on open hole logging in this section.
Sh-2 saved 1-1/2 months over SA-1 and Sh-4 is making even faster progress.
We are determined to get to 6 months hence we keep this duration on the schedules.

Q. The current wells have deeper targets in intervals that you have not drilled before so there is no experience of penetration rates in these intervals
A. The deeper intervals will not be broken up like the Cretaceous so penetration rates with the smaller bits should be better.

Comment: The activity level is truly impressive, with 4 and potentially 5 wells drilling simultaneously at times during the remainder of the year. At one point Todd said we are the most active and the most successful explorer in Kurdistan; the rig schedule and Shaikan OIP numbers show that. You have to believe this has earned GKP a tremendous amount of goodwill from the KRG. If and how that goodwill is translated into GKPs benefit remains to be seen. The request to export crude is an important first step.

Drilling and testing wells like Sh-2 and Sh-4 that drill the full Triassic and potentially TD in the Permian in 6 months is IMO a very tough target; a gold star achievement in fact. The lower Triassic is at higher pressures and it will be natural to proceed with caution initially until the full change in pore pressure has been established. Also we are back into pure exploration at these depths, even more so than the long step out appraisals in the Jurassic, back into the unknown.

If it takes longer than 6 months to complete don’t be disappointed. As I have said before ...every day, every single day, on at least one of the GKP rigs the drill bit will be turning. It will be turning in the relentless pursuit of GKP and KRG oil. Every day is a day of progress somewhere.

Slide 14 Litigation
Except that is in the case of litigation where we spend more time tripping the drill bit than drilling! In fact I think they have stuck pipe lol!
Seriously though, Tony Peart did point out the successes to date. The freezing order against assets was defeated. The ICC arbitration in NY was stopped with an injunction.
The matter of arbitrability will be a subject of a trial which is likely to be sometime next year. Later in the post meeting discussions Tony Peart confirmed that the July 11 date which I believe was some sort of case management discussion has been postponed.

Q. Are you aware of a backer for Excalibur?
A. GKP is assuming they have a backer, based on an advert placed by Excalibur, but they have no evidence of who it is.

Slide 15 Relative Performance
TK answered criticism made in the papers (The Independent?) that compared his compensation with that of the BP CEO. He pointed out that serious shareholder value had been created during the period shown in the slide during which the sp has gone from 5p to 140p and has been higher.

He said “We will get there; it is a process of education, discovery and increasing production. We (meaning GKP and its shareholders and the analysts) don’t make the assumptions about target sp without a reason.”

General Questions and Answers
Q. Does the court case increase our chances to prove up the assets?
A. It gives us enough time to drill the wells we need to (TP).
TK - The court case is irrelevant, the political situation is probably a minor poison pill but neither one is enough if someone is seriously interested.
Several multinationals and supermajors are turning up in Kurdistan and this supports the hope that things are being sorted. Exxon, Chevron, CNPC, Lukoil are all coming now and they and the KRG are paying more attention to one another now (i.e. he thinks the conversations are more meaningful).

Q. Is there any technical barrier to joining the FTSE 250 and how do you feel about it generally?
A. (Ewan) There are still some technical issues to be resolved. A natural point to join is in the first part of year after releasing accounts. GKP has not taken a firm decision to join yet.
TK sees the benefit of joining.

Q. Are we going to add another non exec board member?
A. They decided at a board meeting today to add another non exec by the time of a board meeting in September

Q. What is the significance of an oil law being passed?
A. The discounts that analysts put on the sp for political risk is about 25 – 50% and these would disappear.

Q. What about Mr S?
A. Iraqis are aware that Kurdistan can provide significant production increases to help Iraq reach the targets that it is having difficulty achieving. 3 months ago Kurdistan was not contributing any production, last month it was 7% of Iraqi production. The contribution Kurdistan can make to rebuilding Iraq cannot be ignored.

Q. Has the KRG ever suggested that the PSC may need to be changed to a TSC to achieve an oil law?
A. No

Q. Did Ewan’s comment (at Proactive) that profit to GKP would be roughly north of 10%, did that include all taxes.
A. The PSC terms provide for the government paying all taxes. The north of 10% figure is a sliding scale depending in field size.

Comments: The amount a contractor receives for profit oil over the long term is slightly affected by the amount of cost oil claimed since profit oil is calculated after deduction of royalty and cost oil. I that the sliding scale EA was referring to was related to the variation in field costs ($/bbl) with field size, although I could be wrong.

At $100/bbl oil price, application of the PSC guideline terms for a low risk licence with the low end profit oil split of 13% would yield $11/bbl profit oil, i.e. 11%, for a field with $5/bbl op costs. This is in agreement with Ewan’s figure. However that is before GKPs Additional Infrastructure Support Payment of 40% of Profit Oil. It transpired that GKP did not consider this as a tax, rather it is an agreed payment in return for obtaining the two extra blocks.

Q. What will be the netback on start of exports?
A. (EA) We are not yet involved in the process until export begins but we are working on the basis that DNO has announced which is 40-50% of the oil price. It was explained that the PSCs were negotiated within a fairly tight range so GKPs netback should be similar.

Comments: This was slightly higher than I had been expecting and made me review the published guidelines for Cost Oil Recovery. For a low risk licence the maximum is 36% of “Total Petroleum” or 40% of “Available Petroleum” i.e. that portion of Total Petroleum oil available for “sharing” after deduction of the 10% royalty. For a medium risk licence the maximum cost oil is 43% of the Total Petroleum. The remaining oil is allocated as Profit Oil for sharing between Contractors and Government.

As I understand it, the very early DNO contract was not the same as the later generation GKP took part in. It had two levels of cost recovery with the second level being 45% once cumulative costs recovered exceed $290MM.

Is this a clue I wonder that Shaikan was let as a medium risk licence rather than a low risk one. This could add about 1$/bbl to profit oil after taking into account GKP’s 40% infrastructure payments on Profit Oil. This would boost my NPV calcs which assume a low risk licence. Or is the assumption that DNO and GKPs licence terms are similar incorrect?

Mikey and I had further discussions about the pipeline with Ewan. He made the point that once they knew what capacity/size they needed they did not want to hang about negotiating with lots of different companies for access rights to the pipeline. Their preference would be to size for what they need (once that is known) and then get on with it.

On Excalibur TK said that even the judge called them “chancers” in open court.

It was a very worthwhile meeting. Although about 20+ more PIs attended we managed to retain the intimacy and informality in the Q&A session that was present in Zurich which was a pleasant surprise.

GKP talked as openly as they could, considering the constraints they have to operate under. We saw continued confidence from management that progress is being made towards a political resolution, that Excalibur will be defeated, that the upside case has a good chance of materialising, a new non-exec will be appointed and the management team is fully focused on delivering well results that ultimately will translate into shareholder value.

Some big questions remain open. What is GKPs plan to ensure full value can be secured from BB once Shaikan appraisal gets to the point that it might attract predators for the company? And when will GKP move to the FTSE 250?

It was great to meet a few more shareholders and I’ll leave you with my favourite quote of the day, from one of them, FiFi. “As guys, do you get that charisma that Todd has?” Mikey you don’t have FiFi to yourself, you have competition lol!

Regards and GLA



It does not matter what water it is.

Water & Gas are Drive mechanisms, so as long as one is there, it increases the OIP.

Imagine an invisible Balloon underground, thats the reservoir which has expanded into the Water, rather than lying flat which would be the case with no drive mechanism.

I would say it would be freshish water, but not drinkable

The pressure on the water has been caused by the Oil caught in a trap. As the Oil matures, it expands, causing the water to be push down increasing the pressure on the Oil.

The further down the OWC is, the higher pressure the Oil is subject to.

The number 2 well in the image is an injection well, with No1 being the production well.



A bounding surface in a reservoir above which predominantly oil occurs and below which predominantly water occurs. Although oil and water are immiscible, the contact between oil and water is commonly a transition zone and there is usually irreducible water adsorbed by the grains in the rock and immovable oil that cannot be produced. The oil-water contact is not always a flat horizontal surface, but instead might be tilted or irregular.
Natural forces in the reservoir that displace hydrocarbons out of the reservoir into the wellbore and up to surface.

Reservoir-drive mechanisms include gasdrive (gas cap or solution gasdrive), waterdrive (bottomwater drive or edgewater drive), combination drive, and gravity drainage. Waterdrive is the most efficient drive mechanism, followed by gasdrive and gravity drainage.

Reservoir-drive mechanisms are also called natural drives.
Gas drive.
A primary recovery mechanism for oil wells containing dissolved and free gas, whereby the energy of the expanding gas is used to drive the oil from the reservoir formation into the wellbore.

It has been mentioned in past RNS's about the Gas being able to aid recovery.


John Gerstenlauer, Chief Operating Officer, said:

"The upper Triassic oil and condensate finds announced today, with their associated gas volumes, will be invaluable in the development of the Shaikan discoveries. The excellent permeabilities encountered throughout the well, combined with the availability of significant quantities of gas from the upper Triassic, encourage us to believe that industry average recovery factors (30-35%) might be achievable in the various reservoirs of the Shaikan-1 exploration well. This theory will be evaluated further during the upcoming extended well test."



Whilst the Market may look ahead 6 months, one thing the Market does not like is surprises, and the ME and Japan issue was a surprise.

I agree that the Greek signals have been out for a while, so partly priced in by the Market (evident with the drop in AIM's stocks).
That does not IMHO, take into account those PI's who always act later than the Market, which IMO, is what we see now with GKP and the Volumes on the Bid.

Every stock I have looked at this morning is the same, which shows a lack of confidence IMO.
That lack of confidence shows in the amount of Short sellers, as pointed out by Data Explorers for a while now, though with Longs building positions. See below from DE today.

Good Morning,

Rare Earths – short sellers anticipate further correction; Longs build holdings

China controls 95% of the world’s supply of rare earth elements used in the manufacture of essential high tech equipment ranging from solar panels to flat screen TVs, and missiles to lasers. Bloomberg reports that the nation has tightened controls on mining and export quotas, driving rare earth prices to double over the past two weeks. In April, we reported split sentiment between long and short investors in the quoted rare earth mining companies outside of China. Since the April correction, the share prices of Molycorp Inc, Avalon Rare Metals Inc. and Rare Elements have collapsed by around a third. Longs continue to show faith, yet short sellers believe there is more to come and have continued to build positions.

Visit www.dataexplorers.com/news for Data Explorers news including the full report with supporting charts and a short video.

As always, we welcome any comments - please do drop me a line at will.duffgordon@dataexplorers.com or call me on +44 (0)20 7264 7615.

Kind regards,

Will Duff Gordon

Data Explorers


Back in rights and SP..


Geez… Where is Spikey when you need him? The following LINK includes the contents of Evo’s note of 7 June 2011, just after the analysts’ visit to Kurdistan, and refers to the back-in rights to Shaikan. If someone could actually post the link to the note too, it would be helpful.


Personally, I really don’t think that for a matter as important as BIR’s, this should be a matter for interpretation – on this occasion, only actual trusted sources should be used… if you can call Evo a trusted source that is!

But this extract from the Evo note should help to answer most people's questions....
“The KRG is yet to allocate the 3rd party 15% back-in right for the Shaikan licence. While we do not expect publication of the transaction price we do note that Gulf Keystone will receive 15% of its back costs which should amount to some $30-40m at this stage.”

So, IMO the amount that GKP will receive in respect of the BIRs (once awarded as we understand it to KNOC) will be as shown above, and NOT in any way related to the amount that the KRG get from the sale of the BIRs.

Indeed, I do not believe we will necessarily ever know how much the BIRs are sold for as, if they have gone to KNOC, part of the deal would presumably relate to the huge infrastructure investment ($2 billion) they have already committed to in Kurdistan, in exchange partly for preferential treatment on licences, no doubt!

The important point IMHO will not be the price of the BIR's but that GKP will (hopefully) be partnered with an NOC, and the PSC therefore massively de-risked.

Confirmation of this is VERY IMPORTANT, as it should help to drive the SP upwards (for a change!). The amount that GKP get back will be a drop in the ocean compared to this.

THERE IS NO oil dispute


The article did not read right to me - if there was a current dispute it would be all over the Iraqi press since Iraq has only just sent Kurdsitan $250 million to pay the Kurdistan oil companies. And it isn't!!

Now read this article from June 2008 and note the similarities...


It refers to much the same storyline as in the article posted by Carillion from AK news dated today. It even includes identical quotes from Hawrami.

So, I really don't believe this is a current story at all, and people are simply being mis-led by the apparent date on the article.

As we have said many times before - never trust articles in the Iraqi press... and verify everything against other sources!
Just to clarify my previous post in case there is any confusion:

In the June 2008 article:

"Khurmala Dome is not in a disputed area. It's in Kurdistan, period," KRG Minister of Natural Resources Ashti Hawrami said, adding he considered it a non-producing field. "People say KRG are not allowing them to work in Khurmala. What that really says is it's under KRG control and we'd like to go get it back from them."

Then, in the article from AK news… dated 23 June 2011

'KRG Minister of Natural Resources Ashti Hawrami said: "Khurmala Dome is not in a disputed area. It's in Kurdistan, period. People say KRG are not allowing them to work in Khurmala. What that really says is it's under KRG control and we'd like to go get it back from them."

While it could conceivably still be a hot potato 3 years on... if it is a current article, you would surely expect AK News to use a slightly more recent quote from Hawrami.

Much more likely, the article has been placed to cause friction (and confusion) where there isn't any!

GLA, scaramouche


Gulf Keystone (GKP.L) Add

Sizing up Shaikan

Last week’s analyst site visit to Gulf Keystone’s assets in Kurdistan
highlighted two major catalysts for the company. Firstly, the current
appraisal campaign on the Shaikan structure is aimed at taking the
current PMean estimate of 7.5bn bbls Oil in Place towards the upside
case of 10+ bn bbls Oil
In Place. Secondly, the company is making good
progress on commencing exports at a rate of 5,000 bopd but with the
potential for this to rise to nearer 18,000 bopd by year end.

The main takeaway from the trip was that the locations of the appraisal wells on the Shaikan structure, which will be drilled over the course of the next 18 months, are aimed at raising the PMean estimate of 7.5bn bbls Oil in Place to nearer the P10 estimate of 10.8 bn bbls plus. The inference being that the appraisal programme could add a further 44% to the existing central resource figure.

The company appears to be making good progress towards commencing exports into the main pipeline – negotiating trucking contracts, supply agreements with DNO and installing gas sweetening facilities at the Early Production Facilities which will make the oil suitable for export. Initially, rates of 5,000 bopd (equivalent to c25 trucks/day) are have been sanctioned however, the facilities and existing Shaikan-1 and 3 wells are capable of attaining rates of nearer 18,000 bopd and this is the target for year end assuming KRG approval. Furthermore,
DNO’s announcement on 6th June that it had received payment from the KRG for
its February/March exports is very good news and proves that the interim
payment mechanism is up and running.
On the exploration front, Sheikh Adi-1 has encountered oil shows in many of the
formations de-risked by Shaikan and further testing will occur in due course, with
acid stimulation expected to lead to more impressive flow rates. The Bekheme-1
exploration well is nearing the target objectives while the Ber Behar-1 exploration
well, targeting a structure of similar size to Shaikan, should spud in 3Q 11.

We have raised our Core + Risked NAV valuation slightly to 230p (from 222p) to
incorporate the risked upside of Shaikan however, our TP of 200p is left
unchanged. The discount to Core + Risked NAV reflects the risks associated with
having unapproved PSCs and also the ongoing Excalibur legal dispute. At the
current market price of 158p we believe the share price is underpinned by the
discoveries at Shaikan, Bijeel and cash on the balance sheet, leaving the
exploration campaigns at Sheikh Adi, Bekhme and Ber Behar in for free.

June 11
Near term catalysts …
Over the next three months or so, we expect the Shaikan-2 appraisal and
Sheikh Adi-1 exploration wells to both reach target depth. The results from
the upper section of the Shaikan-2 well have already helped contribute to
an upwards revision to the structure’s resource size so success in the lower
sections should hopefully have a similar effect. Sheikh Adi has made oil
discoveries in many of the formations successful at Shaikan however a flow
test in the upper Sargelu formation failed to produce conclusive results due
to emulsification of the formation fluids. Further flow testing and acid
stimulation of the reservoir could produce more encouraging results.

Drilling aside, confirmation that Gulf Keystone is delivering oil into the
international export pipeline should provide a further positive catalyst
especially as DNO recently confirmed it had received its first payment for
Over the next 18 months the focus is on proving up the resources within the Shaikan
structure. The picture below highlights the locations of 5 of these wells while we
expect Shaikan–6 and 7 to be located to the east of Shaikan-5. The Sheikh Adi
structure sits within the red zone to the north-west of the Shaikan structure.
Location of Shaikan appraisal wells
Source: Company, EVO Securities
Shaikan (GKP 51% fully diluted)
The Shaikan-2 well is being drilled 9km down-dip from the original discovery well.
Successful flow tests have so far been conducted from the Sargelu formation
(highest test rate to date) with oil encountered and awaiting testing in the deeper

June 11
Mus and Butmah formations. The well will drill ahead to appraise the Kurra Chine A
and B formations while going deeper, the well turns into an exploration well
targeting the Kurra Chine Dolomotie formation and Middle Triassic potential. The
well design and well head have been engineered to withstand the increase in
pressure which resulted in the Shaikan-1 well being abandoned in the Kurra Chine
The well has taken longer than expected due to extensive coring that has taken
place in order to better understand reservoir properties which should help in Field
Development Plans etc.
We understand that Ryder Scott will again be engaged to validate the recent
resource upgrade issued by DGA advisors on the back of successful Shaiakan-2
drilling. Indeed, we learnt that DGA have effectively worked as Gulf Keystone’s 3rd
party exploration team rather than being employed purely as Competent Persons.

The Shaikan-4 appraisal well spudded late last month and is located on the western
edge of the structure. The well is likely to take 2-3 months to get to the target
formations and in total, is likely to take c 6 months to complete. In terms of its
impact on resources, Shaikan-4 well is likely to narrow the range of resource
estimates around the PMean number rather than add much incrementally to overall
resource estimates.
Commencing International Exports
Gulf Keystone is making good progress towards commencing international exports at
a rate of 5,000 bopd, in line with the demands of the KRG. Contracts are being
negotiated with trucking companies and also DNO who will transport the oil via their
Tawke pipeline into the main Kirkuk – Ceyhan export line. In addition, Gulf Keystone
has installed gas sweetening equipment which removes the H2S from the oil so that
it meets international export quality.

The initial rate of 5,000 bopd could however be raised to nearer 18,000 bopd by
year end if Gulf Keystone is given permission by the KRG. The two wells linked up to
the production facilities, Shaikan-1 and Shaikan-3, are both capable of producing
c10,000 bopd each via natural flow with the facilities limiting the amount that can be
produced to c. 18,000 bopd.
Going forward, Gulf Keystone is looking to install additional capacity which could see
potential production rise to 40,000 bopd by 2012.
Sheikh Adi-1 (GKP 80% Fully Diluted)
The Sheikh Adi-1 exploration well is located on the crest of a four way dip closure
and has encountered good oil shows all the way through but a flow test of the
Barsarin/Sargelu formation provided inconclusive results due to emulsification of the
formation fluids. Additional testing of the Sargelu/Alan, Mus and Butmah formations
and stimulation through acid fraccing are planned. The well is currently drilling
through the Kurra Chine A and B formations and deeper Kurra Chine Dolomite and
Triassic formations are also planned to be tested.
The company believes that reservoirs located on the other side of the fault that cuts
through Sheikh Adi will have a higher level of natural fracturing because the anticline
is more pronounced and therefore the formations are under greater stress.

Bekheme-1 (GKP 12.8% Fully Diluted)
The Bekheme-1 well is the second well to be drilled on the Akri Bijeel licence block
with the Bijeel-1 well flowing between 2,700 and 3,200 bopd of heavy oil from
various Jurassic formations.
Bekheme-1 has been drilling since March and should be approaching the target
horizons within the Jurassic section (Sargelu/Alan/Mus/Butmah etc). The well is
operated by Kalegran, a 100% subsidiary of MOL.
Further drilling on the licence block is likely to encompass appraisal drilling of the Bijeel discovery while a third structure, Aqra, is also likely to see explorationdrilling although no time frame for this has been set out.

…and beyond
The site has been prepared and the well will likely spud in late August. This is the
first well to target the north side of the structure’s fault and we get the impression there is an element of exploration to this well, with the overall contingent resource estimates likely to benefit across the board in the case of success. The northern side of the Shaikan anticline, targeted by Shaikan-5, is more pronounced than on the southern side where all previous wells have been drilled are located. As such, it is believed that the rocks will be under greater stress and therefore have a higher level of natural fracturing which could ultimately lead to higher recovery/flow rates (same argument as Sheikh Adi).

Shaikan-6 and 7
The Shaikan-6 and 7 wells are still in the “contingent” category and therefore their
locations are not yet formalised. However, looking at the drilling schedule they are
planned for late 2011/early 2012 spud and their location is most likely to be further
to the east of the Shaikan-5 appraisal well (see map on page 2). Due to their
location, these wells would, in our view, have a beneficial impact of bringing the P10resource estimates into the PMean estimates.

Ber Behar-1 (GKP 40% Fully Diluted)
The first exploration well on the Ber Behar licence, operated by Genel Energy, is due
to spud in late 3Q. The well has a number of potential targets in the Jurassic,
Triassic and Permian levels. It is a four-way dip closure with a surface anticline,
10km in length by 4 km wide. Operator Genel gives prospective resource estimate of
1.9bn bbls Oil in Place.

Shaikan Field Development Plan
Gulf Keystone has a year from the time the final appraisal well, Shaikan-7, reaches
target depth in which to submit a Field Development Plan. The company is currently
recruiting a number of personnel to run the project, based both in London and in
Erbil. A 3D seismic survey over the structure due for interpretation in the next few
months will also aid development plans and, we would think, help better define the
resource size.
Below we set out some current thoughts on how Shaikan may be developed but
warn that these are still very preliminary:
► Production Profile: We believe a somewhat phased approach would be taken
with an initial plateau reached at about 250,000 bopd with reservoir
performance then monitored before extending production profile to nearer
500,000 bopd. Near term, the company is constrained by the performance of the
two wells located near the EPF (Early Production Facility) and also the capacity of
the EPF.
► Central Processing Facility (CPF): Likely to located on the south side of the
structure and capable of handling 500,000 bopd with storage capacity the same

June 11
again. Due to the presence of H2S the CPF’s location will have to be relatively
► Transportation: A 120km pipeline to the export pipeline at a cost of c$120m.
The pipeline would be capable of carrying 500,000 bopd with spare capacity sold
to other operators in the area. An alternative solution would be to tie in with
other planned export lines such as one running from the Taq Taq field which is
under consideration.

Gas: Associated gas will be produced with the oil, especially in the lower
formations where the oil API is higher. The company will either make the gas
available to local demand or even undertake a small scale Gas to Liquid project.
There is also the potential to feed gas into the Nabucco pipeline if sufficient gas
is produced to make this a commercially viable option. Gas sweetening modules
will have to be installed to remove H2S and make the gas suitable for sale.
One thing we would point out is that Gulf Keystone has often been seen as a
possible takeover candidate given its large resource base. If this is the case, we
would expect an approach to occur before a Field Development Plan is submitted as
it is difficult to alter after submission and approval.

PSC Ratification
In truth, we learnt very little about if/when Baghdad would ratify contracts issued by
the KRG. The general feeling is that the two sides are much closer than they have
been and optimistically a resolution could be achieved within six months. Indeed, we
believe as the Kurdistan region ramps up exports this will put greater pressure on
Baghdad to ratify the contracts.
Importantly, DNO stated on 6th June that it had received payment from the KRG for
$103.7m relating to its exports for February and March. This is the first time an
operator in Kurdistan has been paid for international exports and proves that an
interim payment mechanism is up and functioning. The payments relate to the “cost
oil” element of the PSCs and the debate as to which party, KRG or Central Baghdad
Government, pays the “profit oil” element remains ongoing. One solution would be
for the KRG to pay 17% of the profit oil, in line with its share of the overall Iraqi
Budget distribution.

The company is financed to complete the current drilling campaigns having raised
$364m during 2010. We believe there is approximately $160m of capex left to
spend. Developments would ideally be funded through a mixture of both debt and
equity however, until the PSCs are ratified we believe banks will be reluctant to lend
under a Reserves Based Lending agreement.
The KRG is yet to allocate the 3rd party 15% back-in right for the Shaikan licence.
While we do not expect publication of the transaction price we do note that Gulf
Keystone will receive 15% of its back costs which should amount to some $30-40m
at this stage.

We have altered our valuation of Gulf Keystone slightly so as to now
incorporate the upside potential in Shaikan as risked exploration. On our
current estimates, the market is valuing the company based upon cash and
the central Shaikan resource estimate alone. This leaves all exploration
drilling in for free which we believe, given the success rate in the Kurdistan
region and proximity to drilling, makes a strong investment case at the
current share price. The first catalyst though is likely to be the
commencement of exports. Our target price is 200p.
Overall we calculate a revised Core + Risked NAV of 230p, up slightly from our
previous 222p estimate.

This whole KNOC situation coupled with the massive drilling and pipeline requirements has me thinking about how KRG and KNOC will view this situation.
After years of foot dragging with Iraq, a sense of urgency develops and KRG decides they need the big boy running everything [drilling/pipeline].
KRG sells BIR's to KNOC and strong arms GKP to do a quick, down and dirty deal with KNOC for the rest.

We don't get every last dime but we get it much sooner.
GKP makes billions as the first mover in Kurdistan but don't really add much to the situation from here on.
KRG owes KNOC big time and KNOC has the wherewithall to move things quickly with cash and political muscle in Kurd and Iraq.


By Ben Lando and Staff of Iraq Oil Report
Published June 22, 2011

A delegation from Iran's Oil Ministry was shot at in eastern Baghdad Wednesday afternoon, the latest in an uptick in violence targeting the oil sector.

At about 1:45 p.m., at Baghdad's Andlous Square, men armed with silenced guns fired on the three-vehicle convoy, which belonged to the Iraqi Oil Ministry, according to a senior Interior Ministry official. Two Iraqis, whom the official referred to as "guards," were injured.

It's not clear whether the gunmen were targeting the delegation spec...


Five Firms Shortlisted for West Qurna 2

Posted on 22 June 2011. Tags: Globalstroy, LUKoil, Punj Lloyd, Saipem, Samsung, SNC Lavalin, Statoil, West Qurna
Five Firms Shortlisted for West Qurna 2

Reuters reports that Iraq and its partners, Russia’s LUKoil and Norway’s Statoil, have shortlisted five companies to compete for the West Qurna Phase Two oilfield development contract.

An Iraqi oil official who asked not to be identified said on Tuesday that the oil service companies selected are Saipem , SNC Lavalin Group Inc , Punj Lloyd Ltd , Globalstroy Engineering and South Korea’s Samsung Engineering.

“We are studying the commercial offers and we expect to select a winning company within two weeks,” the official said.

Last September, Iraq and its partners issued four tenders for construction and energy projects at West Qurna II, a 12.9-billion-barrel supergiant oilfield in southern Iraq.

The official said seven companies submitted bids, but that two, Petrofac Ltd and Technimont, were rejected. He did not offer any reason for their exclusion.

The four tenders are for the construction of an oil export pipeline; a tank farm at Tuba; a power distribution station and an associated gas processing plant; and an oil gathering system, central processing facilities and a water supply system.

The tenders are part of the initial development plan set by LUKOIL and Statoil and approved by Iraq’s oil ministry last year to start production at the untapped oilfield.

They are expected to help production at the field hit 150,000 barrels of oil per day (bpd) in January 2013, the Iraqi oil official said.

West Qurna Phase Two operator LUKOIL is selecting one company to work on an Engineering, Procurements and Construction contract (EPC) for building oil facilities.

(Source: Reuters)


Analysis: Beneath Iraqi soil, an oil boom awaits

Oil seeps from the ground above the Tawke oil field in Iraqi Kurdistan. (BEN LANDO/Iraq Oil Report)

Published June 24, 2011

In 2004, the U.S. Army placed me in charge of evaluating the entire Iraqi infrastructure system, from oil and natural gas to electricity. Part of my job was to estimate the country's resource wealth and figure out how to help Iraq rebuild its energy sector. I concluded that Iraq ranks right up at the top of hydrocarbon-rich countries worldwide, and has the potential to overtake any country in production.

Out of approximately 87 major fields discovered to date, fewer than 30 are producing. The others never really produced at all, yet some of these are classified as super-giant fields with over 12 billion barrels of proven reserves each. When I arrived in the country, several Iraqi engineers informed me that they had only ever produced enough oil to meet their OPEC quota of 3.5 million barrels per day (bpd). They could do that out of just a few fields.

How high is Iraq's production potential? I began my assignment by looking at the data sets that were already available.

Of Iraq's many fields, the first one I worked on was East Baghdad, since I was living just west of there. The field was producing 1,100 bpd, and that was it. Yet as I started looking at all the data, I saw that the field was an anticlinal structure 110 kilometers long and 20 kilometers wide, with 10 pays, Cretaceous through Miocene. There were 16 billion barrels sitting under my feet. The field could produce 1 million bpd, but the existing infrastructure could only accommodate 25,000 bpd.

As I examined data from other fields, I found a similar pattern of under-developed capacity. One day in 2004 I asked an Iraqi engineer why there were so few Permian and Jurassic tests in the south – the same reservoirs that are so productive in Saudi Arabia and Kuwait. The engineer replied, "So much production is already coming out of the Cretaceous, why drill deeper? The deeper oil reserves will still be there in the future."

From a rock hound's point of view, the geology is exciting. There’s glacial in the west, deltas and salt in the south, and all the way to plate tectonics in the north. Everything in geology you’ve ever learned in school, you can use across Iraq.

Not only is there huge potential for Permian and Jurassic production in southern Iraq, but Jurassic, Triassic and Permian exploration in the north should also yield big finds. The Paleozoic, Silurian and Ordovician will be productive in the west. In the last two years, there have also been several recent major discoveries in Kurdistan, where the geology is a little more complex, with plate movement and some complex faulting. There are over 400 2-D structures in Iraq – based on seismic data accumulated by majors and the Iraqi government in the late 1950s through '70s – that have not been drilled yet.

Out of the 2,500 wells drilled in Iraq, all of which are vertical, there are less than 60 holes drilled into the Jurassic or deeper. Most wells are less than 10,000 feet deep. There have been few stratigraphic tests in the south. One day, huge reserves will be found along the western margins of the Gotnia basin in southern and central Iraq, since oil migrates from east to west across the southern region.

I ultimately concluded that Iraq held far greater oil and gas reserves than had been previously estimated. For years, Iraq claimed oil reserves of 115 billion barrels and gas reserves of 100 trillion cubic feet. I asked Iraqi engineers and Oil Ministry officials what these figures were based on. They replied that these had been the official reserves for years, but no one knew where the numbers came from. Since then, Iraq has revised its reserve estimate upward, to 143 billion barrels. There is good reason to believe there's even more.

Given the data I had at the time, I calculated that Iraq's 84 fields held 230 billion barrels of proven reserves. I also evaluated the country's natural gas reserves, especially Akkas field in Anbar province, and calculated almost 200-plus trillion cubic feet of reserves. (Most of Iraq's gas production is currently being flared off.) Since then, a couple of new fields have been discovered in the Kurdish region, representing an additional 4 to 7 billion barrels of oil reserves and 9 trillion cubic feet of gas.

Beyond the limited exploration and development of fields, a major obstacle to production in Iraq is the horrendous condition of the infrastructure. When I arrived in country, most everything was broken or stolen, including pumping stations and compressors. Most of the water flood projects had broken down, especially in Kirkuk and the southern part of the country. The workers were re-injecting processed crude and residual oil back into the sands and carbonates because there was no other place for it. Such practices stymied production and shortened the life of the fields.

Iraq has now brought in some of the largest international oil companies to revamp its fields. The recent bidding process for service contracts to develop the large fields in Iraq proved that the majors want to be involved in the future exploration of Iraq, even if they have to accept marginal terms today on the development contracts. There are going to be more opportunities for both major and independent oil companies to become involved in both the development of current fields and the exploration for new reserves in Iraq. Oil service companies will also be needed, not just to repair but also to replace infrastructure. And there will be a great need for up-to-date seismic and gravity surveys, given that most of Iraq hasn’t been properly explored.

Iraqis have oil; they just need to pump it out. It’s easy to get to, and the exploration costs are extremely low.

The key is not finding the oil, which doesn’t take a genius – a first year geologist, engineer and geophysicist could tap the major structural traps scattered across Iraq. The oil sector's main challenges are infrastructure, violence, and politics. If Iraq gets its act together with a good hydrocarbons law, makes more security gains, and brings in the service companies to repair the infrastructure, there’s no reason the country can't rise to the top of world production.

Harry T. “Bud” Holzman, Jr. deployed to Iraq as the U.S. Army's Chief Analyst for Iraq Oil and Gas Infrastructure in 2004. A geologist by training, he worked with the Oil Ministry and other agencies to help rebuild infrastructure, and gave advice on several of the oil and gas articles in Iraq's constitution. Before his time in Iraq, while serving in the Army Reserves, he was the president of the geological information and mapping company Geomaps. In 2008 he retired from the Army after 41 years of decorated service and now works as a geological consultant in San Antonio, Texas.

Oilbarrel-Oil Traders Surprised By The Shock Move
Votes for this Posting
June 24, 2011

Oil Traders Surprised By The Shock Move By The International Energy Agency (IEA) To Release Stocks
By Eithne Treanor

A surprise move by the International Energy Agency, the IEA, in releasing stocks, , had analysts scratching their heads and oil producers wondering why the consumer agency would make such a gesture. The oil price fell to a four-month low after this surprise move on Thursday, but recovered slightly. In early trading on Friday, WTI was trading around US$92 with Brent crude above $107 a barrel.
OPEC members have managed to replace much of the oil from Libya, but the IEA said its release of 60 million barrels was to help make up any short-fall. Half of this oil will come from American inventories with the remainder from other emergency stocks. Data from OPEC, the IEA and other agencies clearly indicate an increase in demand later in the year. The commitment from Saudi Arabia to increase oil production when needed was welcomed by the IEA who say these additional stocks will take time to come to market, so the release of emergency supplies will “help bridge the gap.” This is the third time in its history that the IEA has taken such a measure. The IEA executive director, Nobuo Tanaka has expressed concerns about the fragility of the global economy and this action should “ensure a soft landing for the world economy.”

Earlier in the week, officials in the US expressed frustration about the failure of OPEC to release more supplies and said that President Obama was “deeply concerned” about the disruption in oil supplies. America has resisted releasing their Strategic supplies to the market saying they should be tapped only in emergency. Oil producers and analysts have questioned such a sudden move, especially as the oil price appeared to be easing. The IEA’s main oil market analyst, David Fyfe said the decision was triggered by the disruption in supply and not only by the current price. A spokesman from the American Petroleum Institute questioned the move at a time when American crude and gasoline inventories are above average.

Investment bank JP Morgan cut its Brent crude price forecast for the third quarter to US$100 a barrel, down from a previous US$130 a barrel on doubts that consuming countries will have an appetite for the additional oil. Iran’s OPEC governor, Seyed mohammad Ali Khatabi Tabatabai said this move could not be justified on supply and demand fundamentals. The Venezuelan energy and petroleum minister Rafael Ramirez made it very clear he did not approve of such action but said there was no need for OPEC to call an emergency meeting and said that “the United States, Italy and France are in election campaigns and they are looking for a short-term decision which is not sustainable.” Comments from other various OPEC member countries on condition of anonymity questioned the sense of the move and calling it “an interference in the market.”

Venezuela intends to increase oil production in coming years with the help of foreign partners who will develop joint ventures. Ramirez told reporters he was optimistic that Chinese and Italian banks would fund the bill of US$5.5 billion for exploration and production in the giant Orinoco fields. The joint ventures will be with China’s CVPC and Italy’s Eni and he hoped production would begin later this year. The Venezuelan state oil company PDVSA already signed two news oil and gas deals with South American neighbor Ecuador to jointly explore for oil in two blocks in the Ecuadorian eastern Amazon region. Petroecuador will also explore for natural gas in Venezuela to be transported to Ecuador as part of the deal. Both countries are also working on a US$12 billion refinery project in Ecuador.

Oil exports from Nigeria are expected to rise in August this year. Production is at its highest level in 5 years and the African producer says it expects to load about 2.5 million barrels a day. Current production is just over 2 million barrels a day. One of Nigeria’s independent energy companies is examining a listing in London later this year. Eland Oil and Gas recently bought a Nigerian block from Shell and the company’s CEO Les Blair says the time is right to look at a public listing for the company. Nigeria’s US$8.5 billion gas project, Brass LNG has its delayed final investment decision until the end of this year and the planned start-up date till 2016. The state owned energy company has a 49% share in the project with Total from France, Italy’s Eni and ConocoPhillips as its partners. The project involves building a huge two-train liquefaction plant in southern Nigeria.

Saudi Arabia is expected to pump more than 10 million barrels a day next month to satisfy global demand should figures prove accurate. OPEC member Kuwait is currently producing about 2.5 million barrels a day and expecting to increase to 2.7 million barrels. Kuwait is the world’s fourth biggest oil producer.

Oil production is looking healthy this time of year despite Libyan oil being off the market. OPEC countries will continue to meet demand and the fresh release of IEA reserves will guarantee no shortage. The state of the fragile economy still worries the IEA and remains a concern for everyone. The European debt crisis may have got some relief from the stronger European players this week, but some countries, Greece, Portugal and Ireland will face a rough few years ahead with limited growth potential.

Demand for oil and energy in China and the Far East remains strong and emerging economies are resilient. Many investment houses are bullish on the oil market despite this temporary IEA increase in supply and drop in price. Societe Generale sees oil market fundamentals remaining strong for the remainder of the year and raised its price forecast for Brent crude to US$112.68 a barrel for 2011 and even higher to more than US$115 for 2012. Long term numbers look optimistic for global energy demand and any shortfall can and will be met by OPEC and non-OPEC producers.


Goldman Sachs: BUY THE DIP (In Oil Stocks)
Mamta Badkar | Jun. 24, 2011, 8:55 AM

Goldman Sachs has recommended buying the dip in oil equities ahead of the IEA's release of Strategic Petroleum Release-held (SPR) oil into the market.
28 IEA members have agreed to release 60 million barrels of oil in July to compensate for disruption in oil supplies stemming from civil unrest in Libya. The conflict in Libya had removed 132 million barrels of light, sweet crude oil from the market at the end of May.

The SPR release will weigh on oil prices in the near term but the release is consistent with the bullish outlook on fundamentals. In a new report, Goldman Sachs explains why:
OPEC spare capacity is limited, backed by the IEA's announcement that the SPR release is necessary to meet summer oil demand.
3.5% global GDP growth guarantees that oil demand will exceed available supply growth.
The SPR releases increases the likelihood of a soft landing for global oil demand growth.
The Energy Select Sector SPDR Fund (XLE) historically hasn't outperformed or underperformed the S&P500 at the time of an SPR release, but in the six months after the announcement, it has on average risen by 3% and outperformed the S&P500 by 5%.
Buy-rated favorites are Cenovus Energy, ExxonMobil, Marathon Oil, Occidental Petroleum, OGX, and Suncor Energy among refiners.

Read more: http://www.businessinsider.com/goldman-sachs-buy-dip-in-oil-equities-2011-6#ixzz1QDDG9BlZ


Sh-2 @ 3,166mtrs x say 25mtr per day x 7 days = 3,341mtrs

SA-1 @ 3,515mtrs x say 25mtrs per day x 7 days = 3,690mtrs

Bek-1 @ 2,828mtrs x say 25mtrs per day x 7 days = 3,003mtrs.

All figure approximate and all approaching the OWC.

Plus the 30th and the BIR's 6 days away, and what will we soon have.

A possible NOC joining GKP and MOL in two Licences, plus more OIP, and loads of

Any day now we could get News.

The only thing different between shorters and longers, is its easier to be a shorter.

Longers research and take positions as they see an opportunity.

Shorters are lazy mothers, and just wait for a Company to release News, watch for the spike jump on board and ride it back down. Only mis-timing can effect them.

GKP has been good for shorters, but its a dangerous stock to play, mainly due to the politicals.
Today a few may have got burnt by the rise,and now the shorters have a problem, which is when to open, as GKP could just fly at any time, all it needs is a little volume.

Most shorters making all the noise here use spread bets, and small stakes being natural cowards.
They make very little money, while longs have made the most with GKP.

Long and strong laughing at them. Mikey



As a result of the financial pressures it seems quite possible that Baghdad has asked Exxon and the other oil groups to move into Kurdistan to help accelerate the region’s oil productivity and pipeline infrastructure development, said the banker. Kurdistan’s main two oil producing companies Sinopec and DNO [DNO NO] are shortly to be supported by Gulf Keystone Petroleum [GKP LN] as the region attempts to achieve production targets of 1m bopd in 2014 set by Ashti Hawrami the KRG’s oil minister.

“By asking oil groups with contracts in the south to move into Kurdistan, Baghdad will have some leverage over these companies and therefore the region in the future,” speculated the banker. At the moment the KRG has a window of opportunity to press its various oil, land and power disputes with Baghdad as it knows its oil is important to developing central Iraq’s infrastructure. But in two years or so when the infrastructure in the south is further developed the relationship may change, added the banker.

It is in the global economy’s interest to see the current accord between Baghdad and Irbil, Kurdistan’s capital, maintained especially in light of OPEC’s recent shock failure to agree on an increase in oil production that would have lowered crude prices. Analysts at JP Morgan last week said Iraq will be “critical” to OPEC’s incremental supplies of crude through next year.


No Risks From Balance Of Payments

June 2011 | Economic Analysis

BMI View: Iraq will continue to have a stable balance of payments over the medium term. Higher oil output will lift the current account, while strong foreign direct investment interest will ensure the financial account remains stable. Political risks remain the key concern, with a potential resurgence of violence and policy stalemate posing downside risks to our forecasts.
We maintain our view that Iraq's balance of payments dynamics will remain stable over the medium term ( see our online service, February 14, 'Balance Of Payments On Stable Footing'). More optimistic forecasts for the oil sector, elevated energy prices on international markets, and the continuation of large-scale foreign investment projects, underpin our view. We have revised up our 2011 current account surplus forecast to 8.4% of GDP, from 2.9% previously.
Success in boosting output at a number of Iraq's oilfields has brightened our outlook on the country's energy sector, and we have modified our oil forecasts to reflect our increasingly bullish perspective. Indeed, BMI's Oil and Gas research team made significant forecast changes in recent weeks, raising its production and exports forecasts throughout our five-year forecast period ( see accompanying chart). By 2015, we project oil production to come in at approximately 6.2mn barrels per day (b/d), nearly double the figure we had previously forecast. This increase in production will have a pronounced effect on oil exports, which we now project to come in at 5.3mn b/d by 2015, up from the 2.3mn b/d we had previously forecast. The increased output of Iraqi oil will have a significant positive effect on the trade balance, which we expect to come in at 13.1% and 8.0% of GDP in 2011 and 2012.
Elevated prices in international energy markets will have a pronounced effect in the short run, in our view, though we do not expect the rise in prices to be sustained over the coming quarters. The OPEC basket has averaged approximately US$107 per barrel (/bbl) thus far in 2011, which has boosted the value of Iraq's oil exports markedly, and we expect the benchmark figure to average US$102.00/bbl in 2011. Beyond 2011, we expect the OPEC basket to average US$94/bbl in 2012 and US$90/bbl in 2013, as fears of supply shocks and political unrest subside somewhat.
In terms of imports, we expect the Central Bank of Iraq to maintain the local currency's peg to the US dollar, which will likely see a rise in the country's import bill over the coming quarters. We forecast imports to rise approximately 20% year-on-year (y-o-y), owing to high prices for international food and fuel commodities, as well as a weakening dollar.
While higher oil revenues will certainly have a positive effect on the current account, Iraq will not experience the full benefits. The UN Compensation Commission was created during the 1991 Gulf War to compensate victims of the Iraqi invasion of Kuwait, and the payments were to be made from oil revenues. Thus, up to 30% of oil revenues will flow out of the country in the form of official transfer payments, thereby weakening the effect of oil exports on the current account.
Iraq's financial account also looks extremely healthy, as foreign investors are keen to help rebuild the country. Indeed, massive infrastructure development plans have garnered high levels of interest from foreign players, and we believe that interest will remain over the long term. A US$7.25bn agreement was signed with South Korean firm Hanwha Engineering and Construction for the construction of an entire town outside Baghdad, including 100,000 homes and supporting infrastructure ( see our online service, May 26, 'Major Housing Deals Keep On Coming'). Baghdad's plans to tender US$1bn worth of hospital construction contracts is another factor supporting the BMI Infrastructure team's view that Iraq is a high reward market in the infrastructure sector (albeit with high risks as well).
The outlook for investment in the oil and gas sector appears to be positive, but slightly less sanguine. While oilfield development continues to proceed rapidly, Iraq's gas sector has suffered a series of setbacks. The lethargic pace at which Iraq's Council of Ministers has been approving gas field development contracts, including the Basra gas deal ( see our online service, May 31, 'Deadline Looms For Final Basra Gas Deal As Government Prepares Back-Up Plan'), has weighed on investors' confidence in the sector, and the departure of KazMunaiGaz from the Akkas development project also boded ill for investors.
Risks To Outlook
We see downside risks to our balance of payments forecasts owing to political risks. Iraq is undergoing a series of political challenges, including the decision on whether or not to extend the US troop presence, the threat of al-Qaeda revenge attacks for the killing of Osama bin Laden, and a possible breakdown of the current coalition government. An uptick in political unrest could see lower foreign direct investment (FDI) flows, particularly as the more stable Kurdistan region has also experienced unrest in recent months.


Shaikan & Akri Bijeel


It has often been seen in the Presentations that GKP will hold 51% of Shaikan and 12.8% of Akri Bijeel should the KRG exercise its rights in full.

GKP currently hold & pay for 80% of Shaikan, with MOL holding and paying for 20%, the opposite with Akri Bijeel, with the KRG getting free carry on boths its 20%.

The way I see it, the KRG can award 37.2% in three ways.

All to themselves, (unlikely)
15% to a Third Party and 20% remains with themselves, (highly possible)
The full 37.8% to a Third Party. (possible)

No doubt, an interesting week ahead.




Many failed to understand that an oil junior like GKP had never for once thought that it could find a massive oil discovery in Shaikan!!

Thats what made TK spontaneously remark that Shaikan is an oil man's dream!!John G said to a few of us at the AGM,that GKP struck a huge lottery!!!

GKP would have to raise alot of monies in the financial markets to develop Shaikan alone to bring production to at least 300K barrels per day!GKP as an oil junior dispite having a massive oil resource in Shaikan will have difficult to borrow from the banks,unlike a MNC or NOC where the banks will readily lend them to the maximum to develop Shaikan.Incidentally all these interests cost incurred could be cost recovered,but in the case of GKP,by raising more monies through a share placement or bonds will cause a fair bit of dilution and not advantageous to principal holders like TK.

It will be a better option to disposed GKP to a new buyer with a much bigger balance sheet that could borrow to develop Shaikan and the new buyer will only have to pay for GKP's initial acquisition costs!!

Hence,i do not see GKP go the distance to develop Shaikan,or even Sheihk-Adi!!As for fundamentals and i want to take it to the very extreme to prove a point,even if we have zero for Akri-bijeel,Sheikh-Adi anf Ber Bahr,which is not the case,Shaikan's valuation by itself is worth more than GKP''s current SP of 140p!!!!

As for the derampers,they will attribute it to Excalibur and politics.Yes,i agree but the Excalibur frivolous suit is beginning to be more apparent to many after GKP won round 1 of hearing the suit in London than in New York and as per the Judge's remarks,i do not see them winning and prolonging it is to give a false impression that they have a chance of winning which in actual fact they want to continue to weigh down GKP's SP!!!

As for politics,and Bloomberg's report last night that Shahristani says that Iraq could add at least 30Billion proven oil reserves from Kurdistan to the National Iraq oil proven reserves,says alot, that both the KRG and ICG are coming to a solution and the Oil and Gas Law passing will be the catalyst.

Goodluck and be steadfast,as i posted on Friday the market read PetroHawk completely wrong,the share price was dropping prior to BHP's surprise take Over and it actually dropped the day before the announcement of the Take Over.This says alot, that Mr Market which are made up of you and me,institutions,Pi's from everywhere do not necessarily get what's happening behind the corporate scenes correct!!!

If by looking at the TA of PetroHawk,those that sold the day before must probably be their biggest regret they made,all they had to do was to sit and wait and forget whether PetroHawk was trading at 28USD,26USD,etc and if they had the patience the all cash offer of 38.75USD from BHP would have made their investment in Petrohawk memorable!!

I urge all GKpians to do the same,trading it now,as we say in horse racing terms GKP is now into the home turn,2furlongs from the finishing post,you will not want to sit out of this champion multiple group 1 winner in GKP!!