By John Lee.

Pearl Petroleum is reportedly planning to raise additional funding for its drilling and development in Iraqi Kurdistan,

According to Reuters, Patrick Allman-Ward, the chief executive of Dana Gas, which is the majority owner of Pearl Petroleum, told reporters that the funding will “comprise a mix of bank debt, a bond, Exim bank financing as well as contractor and vendor financing.

The company is developing that Khor Mor and Chemchemal gas fields in Iraqi Kurdistan.

(Source: Reuters)

Dana Gas and Crescent Petroleum Announce 30% Gas Production Increase in Kurdistan Region

Dana Gas, the Middle East’s leading publicly-listed regional natural gas company, and its partner Crescent Petroleum, have announced achievement of a 30% increase in production capacity at the Khor Mor field in the Kurdistan Region of Iraq, which the companies jointly operate on behalf of Pearl Petroleum.

This increase delivers much-needed gas supply to fuel power plants in the region, and marked a major milestone as the companies commemorate 10 years of continuous production in the region in a special ceremony with the Kurdistan Regional Government in Erbil.

The expansion at the Khor Mor gas processing plant consisted of a series of plant additions and modifications to de-bottleneck throughput, raising output capacity from 305 MMscfd of natural gas to 400 MMscfd, with over 15,000 barrels per day of condensate.

The Plant, which began operating in 2008, supplies natural gas from the Khor Mor field by pipeline to power plants in the towns of Chemchemal and Erbil, and will soon supply a new plant in Bazian. The Khor Mor Plant also produces LPG and NGL, which are sold and trucked to the local markets.

Under a Gas Sales agreement signed in January 2018 with the KRG Ministry of Natural Resources, Pearl Petroleum will sell the additional quantities of gas to supply the power stations with affordable, environmentally favourable fuel, and further enhance electricity supplies.

The plant expansion comes online as Pearl celebrates a decade of production in the KRI. At a ceremony in Erbil attended by Kurdish Regional Government Prime Minister Nechirvan Barzani, Minister of Natural Resources Dr. Ashti Hawrami, and other senior officials, Board Members and senior executives from the companies commemorated the partnership between the companies and the KRG in delivering progress and improved services to the people of the region over the past decade.

Total investment in the Kurdistan Gas Project to date exceeds $1.4 billion with total cumulative production over 250 million barrels of oil equivalent (boe), which has resulted in over $20 billion of fuel cost savings and economic benefits for the Kurdistan Region and Iraq as a whole. Further investment is underway to expand production to 900mmscfd per over the coming 3 years, together with associated liquids.

Mr. Majid Jafar, CEO of Crescent Petroleum and Board Managing Director of Dana Gas, commented:

This production increase marks an important milestone as we also commemorate ten years of continuous production, and the beginning of a new chapter of expansion in operations and production which will see a further investment of over $600 million over the coming few years and a more than doubling of production again.

“The gas we have produced has led to significant fuel savings and social and economic value for the economy, and we hope to grow this in the years to come from the significant resources of these world class fields, for the benefit of the Kurdistan Region and all of Iraq.”

Dr. Patrick Allman-Ward, CEO of Dana Gas, added:

“Despite many challenges over the past ten years we are proud to have maintained our production levels and operations and now with the settlement of all past receivables last summer and continuous payments since then, we look forward to significantly growing production to meet the growing demand for gas and electricity in the Kurdistan Region and Iraq as a whole.”

In August 2017, Pearl Petroleum reached a full and final settlement with the KRG of the arbitration between them, including receiving $1 billion in cash from the KRG for past receivables and committing to expand their investment and operations in the region.

These expansion plans include a multi-well drilling program now underway in both the Khor Mor & Chemchemal fields, as well as installation of additional gas processing and liquids extraction facilities.

Operation full-time staff numbers are over 600 with over 80% local staff, and training programmes to increase this figure further. In addition, the companies has contributed to local communities with support for local power generation, education and healthcare facilities, as well as support programmes for internally displaced people in Iraqi.

The Kurdistan Gas Project was established in 2007 as Dana Gas and Crescent Petroleum entered into agreement with the Kurdistan Regional Government (KRG) for exclusive rights to appraise, develop, produce, market, and sell petroleum from the Khor Mor and Chemchemal fields in the Kurdistan Region of Iraq (KRI).

Production from the newly built plant in Khor Mor began 15 months later, in October 2008, an industry record. In 2009, Pearl Petroleum was formed as a consortium with Dana Gas and Crescent Petroleum as shareholders, and with OMV, MOL, and RWE joining the consortium subsequently with a 10% share each.

(Source: Dana Gas)

The Kurdistan Regional Government (KRG) and Pearl Petroleum have signed an agreement to increase production of gas from the Khor Mor field later this year, to boost much needed electricity generation for the people of the Kurdistan Region and Iraq as a whole.

The 10-year gas sales agreement will enable gas production from Khor Mor field to increase by 25% later this year, from 320 million cubic feet per day currently to 400 million cubic feet per day.

Dr Ashti Hawrami, KRG Minister of Natural Resources, said:

“We are pleased to see the further commitment of expansion and investment by the companies and the anticipated growth in gas supplies will make a positive contribution to the growing domestic needs for more electricity.”

As part of a final settlement of arbitration in August 2017, Pearl Consortium, which is led by Crescent Petroleum and Dana Gas, committed to expanding their investment and operations in the region.

The companies plan a multi-well drilling program in the Khor Mor and Chemchemal fields, as well as installation of new gas processing and liquids extraction facilities. The overall aim is to increase gas production by a further 125% within two years, to 900 million cubic feet per day.

KRG also welcomes Dana Gas and Crescent Petroleum’s expansion of their local training and employment programs, as agreed in the arbitration settlement. The companies employ close to 500 full-time local personnel representing over 80% localisation, and have training programmes to increase this figure further.

See also the Dana Gas press release on the Gas sales agreement (external link)

(Source: KRG)

The Kurdistan Regional Government (KRG) will immediately pay $1 billion to the Pearl Consortium, including Dana Gas, and its partners to settle a long-running legal dispute.

In a joint press release, the Kurdistan Regional Government and Pearl Consortium announced the “full and final settlement” between the two parties.

Below is the full press release:

Settlement Agreement between Kurdistan Regional Government of Iraq (the “KRG”) and (i) Dana Gas PJSC; (ii) Crescent Petroleum Company International Limited; and (iii) Pearl Petroleum Company Limited (“Pearl”); together (the “Consortium”)

The KRG and the Consortium, together (the “Parties”), signed a Heads of Agreement onc and Chemchemal fields on 4 April 2007 (the “HoA”). Subsequently a dispute arose between them concerning certain matters under the HoA, and they referred this disputeon 21 October 2013 to an arbitration under LCIA case reference number 132527 (the “Arbitration”) for decision by an arbitral tribunal (the “Tribunal”) in London.

The Parties have mutually agreed to fully and finally settle all their differences amicably by terminating the Arbitration and related court proceedings, and releasing all remaining claims between them, including the substantial damages asserted by the Consortium against the KRG; implementing a mechanism for settlement of $2,239 million awarded by the Tribunal to date ; and proceeding with immediate further development of the HoA’s world class resources for mutual benefit as well as the benefit of the people of the Kurdistan Region and all of Iraq.

The agreed settlement highlights are as follows:

  • The KRG will immediately pay Pearl a sum of US$600 million.
  • The KRG will also immediately pay Pearl a further US$400 million to be dedicated for investment exclusively for the aforesaid further development to substantially increase production.
  • Pearl will increase gas production at Khor Mor by 500 MMscf/day, a 160% increase on the current level of production (the “Additional Gas”). The Additional Gas, together with significant additional amounts of condensate, is expected to begin production in approximately two years.
  • The balance of sums awarded by the Tribunal ($1,239 million) is no longer a debt owed by the KRG and will be reclassified as outstanding cost recoverable by Pearl from future revenues generated from the HoA areas.
  • The profit share allocated to Pearl from future revenues generated from the HoA areas are adjusted upwards to a level similar to the overall profit levels normally offered to IOCs under the KRG’s Production Sharing Contracts. This adjustment reflects the larger investment risks and costs involved in the development of natural gas resources compared to oil developments. After the recovery of costs and a return on investment by the Consortium, 78% of revenues generated from the HoA areas will be for the account of the KRG, and 22% for the account of Pearl.
  • The Parties have clarified the Khor Mor block boundary coordinates and the KRG has awarded the Consortium investment opportunities in the adjacent blocks 19 and 20, and added these to the HoA areas, with commitments by the Consortium to make appraisal investments on these blocks, and developments if commercial oil and gas resources are found.
  • The KRG will purchase 50% of the Additional Gas on agreed terms to boost the gas supply to power generation plants in the Kurdistan Region. The other 50% of the Additional Gas (250 mmscf/d) will be marketed and sold by Pearl to customers within Iraq or by export, or can be sold to the KRG as well to further boost power generation within Iraq.
  • Pearl will also expand its local training and employment programs towards achieving maximum localization and content, as well as supporting local communities through its active Corporate Social Responsibility (CSR) programmes.
  • The Parties have exchanged mutual releases, waivers, and discharges in relation to all claims in relation to the Arbitration and related court proceedings.
  • The Parties have also amended and clarified the HoA language and terms, including extension of the term of the contract until 2049.

The Parties are very pleased with their settlement and and look forward to working together to maximise the full potential of the HoA areas, for their mutual benefit as well as that of the people of the Kurdistan Region and all of Iraq.

Under the settlement, the people of the Kurdistan Region and Iraq will enjoy additional revenues and improved electricity supply. The Parties believe that this settlement agreement confirms to international investors that the Kurdistan Region of Iraq offers an attractive and secure environment for investment.

H.E. Dr. Ashti Hawrami, Minister of Natural Resources of the KRG, said:

“The companies’ investment and production to date has already delivered substantial benefits for the Kurdistan Region through enabling cost-effective power generation. We are delighted by the outcome of this settlement which opens a new chapter in the relationship between the parties and will take the development of the important natural gas sector to new heights.”

Mr. Majid Jafar, CEO of Crescent Petroleum and Managing Director of the Board of Dana Gas PJSC, added:

“We have always expressed our commitment to amicable resolution of matters to enable proper development of the Khor Mor and Chemchemal fields. We are pleased with this definitive agreement which follows constructive dialogue with the KRG and promises to generate significant value for all concerned. The settlement of all debts and restoration of full cooperation gives a positive outlook for further investment and full realization of the enormous resource potential of the HoA areas.”

(Sources: KRG, Dana Gas)

In its Q1 Financial Report, Dana Gas reports that its production has fallen 16 percent in Iraqi Kurdistan:

KURDISTAN REGION OF IRAQ – RESERVES UPDATE

As reported previously Dana Gas and Crescent Petroleum, joint operators of Pearl Petroleum Company Limited (“PPCL”), estimate that P50 total geologically risked resources of petroleum initially in-place (PIIP) of the Khor Mor and Chemchemal Fields to be 75 Trillion standard cubic feet (Tscf) of wet gas and 7 billion barrels of oil.

PPCL appointed Gaffney Cline Associates (“GCA”), to carry out a certification of the reserves for these fields as at 31st December 2015 based on a comprehensive data set comprising ca. 1200 km 2D seismic, the 11 wells drilled in the two fields to date plus field production data over a period of seven years.

In their report dated April 2016, GCA provided Proved plus Probable (2P) gas and condensate reserves estimates for both fields. For Khor Mor these are 8.5 Tscf and 191 MMbbl and for Chemchemal 6.6 Tscf and 119 MMbbl respectively. Total Dana Gas share of the Khor Mor and Chemchemal 2P reserves is therefore 5.3 Tscf gas and 109 MMbbls condensate, equivalent to 990 MMboe.

GCA’s report confirms Dana Gas’ and Crescent Petroleum’s belief that Khor Mor and Chemchemal have the potential to be the largest gas fields in the KRI and indeed in the whole of Iraq, making them world class assets.

PRODUCTION & DEVELOPMENT PROGRESS

Dana Gas’ share of gross production (35%) in the KRI was 25,500 boepd as compared to 30,400 boepd in Q1 2015. On a retrospective basis, Q1 2015 production on a 35% equity share would be 26,600 boepd. Production has therefore declined by 4% quarter on quarter as LPG train optimisation continues.

By John Lee.

UAE-based Dana Gas has announced that it has reached an “amicable and mutually beneficial settlement agreement” with RWE’s trading unit RWE Suppy & Trading GmbH (RWEST) to resolve a dispute over its operations in Iraqi Kurdistan.

The detailed terms of the settlement agreement are to be treated in accordance with the confidentiality provisions of the arbitration dispute resolution rules.

As part of the settlement, RWEST Middle East has also joined the Pearl Petroleum consortium as a full partner for 10 percent.

Dana Gas has said that it and its consortium partners are committed to working together with the KRG in order to realise the full potential of the significant resources in the Khor Mor and Chemchemal fields for the benefit of the Kurdistan Region and Iraq, as well as the wider region.

(Source: Dana Gas)

By John Lee.

The Kurdistan Regional Government (KRG) has reacted angrily to a statement from Sharjah-based Dana Gas.

Shares in the company jumped 13.7 percent on the Abu-Dhabi stock exchange on Sunday after the company won a ruling in the London Court of International Arbitration (LCIA) in its long-running dispute with the KRG in Iraq over payment arrears of $2 billion [2.4 trillion Iraqi dinars].

The company said in a statement:

“The Tribunal’s Award confirms:

  • the Consortium’s [Dana Gas, Crescent Petroleum and Pearl Petroleum] exclusive long-term rights to develop and produce gas and petroleum from both the Khor Mor and Chemchemal fields for the duration of the Contract, being not less than 25 years. (These rights had previously been disputed by the KRG since May 2009, preventing the proper and timely development of the fields);
  • the KRG’s contractual obligation to pay the Consortium for the produced condensate and LPG at international prices, including the pricing methodology for each; and that
  • Dana Gas and Crescent Petroleum were entitled to farm out part of their own interests to MOL and OMV, and that the KRG was not entitled to a share of the farm-out proceeds.”

But in a response, the KRG’s Ministry of Natural Resources said that Dana has misled investors, and that “Dana’s public statements about the partial award are inaccurate and/or incomplete in numerous material respects, ” addng:

“The KRG has incurred significant damages as a result of the failure of Dana and its principals to honor their obligations, and will continue vigorously to pursue its claims for damages and other relief against both Dana and its principals in all appropriate fora.”

The full statement from Dana Gas can be read here, while the KRG’s response can be read here.

(Sources: Dana Gas, KRG, BasNews)

(Picture: Dana Gas operation in Iraqi Kurdistan)

By John Lee.

The Kurdistan Regional Government (KRG) has reacted angrily to a statement from Sharjah-based Dana Gas.

Shares in the company jumped 13.7 percent on the Abu-Dhabi stock exchange on Sunday after the company won a ruling in the London Court of International Arbitration (LCIA) in its long-running dispute with the KRG in Iraq over payment arrears of $2 billion [2.4 trillion Iraqi dinars].

The company said in a statement:

“The Tribunal’s Award confirms:

  • the Consortium’s [Dana Gas, Crescent Petroleum and Pearl Petroleum] exclusive long-term rights to develop and produce gas and petroleum from both the Khor Mor and Chemchemal fields for the duration of the Contract, being not less than 25 years. (These rights had previously been disputed by the KRG since May 2009, preventing the proper and timely development of the fields);
  • the KRG’s contractual obligation to pay the Consortium for the produced condensate and LPG at international prices, including the pricing methodology for each; and that
  • Dana Gas and Crescent Petroleum were entitled to farm out part of their own interests to MOL and OMV, and that the KRG was not entitled to a share of the farm-out proceeds.”

But in a response, the KRG’s Ministry of Natural Resources said that Dana has misled investors, and that “Dana’s public statements about the partial award are inaccurate and/or incomplete in numerous material respects, ” addng:

“The KRG has incurred significant damages as a result of the failure of Dana and its principals to honor their obligations, and will continue vigorously to pursue its claims for damages and other relief against both Dana and its principals in all appropriate fora.”

The full statement from Dana Gas can be read here, while the KRG’s response can be read here.

(Sources: Dana Gas, KRG, BasNews)

(Picture: Dana Gas operation in Iraqi Kurdistan)

By John Lee.

Sharjah-based Dana Gas and its consortium partners, Crescent Petroleum and Pearl Petroleum, is pursuing $100 million (117 billion Iraqi dinars) in payments from the Kurdistan Regional Government (KRG).

In a statement to the Abu Dhabi Securities Exchange (ADX), the company said:

“The LCIA [London Court of International Arbitration] Tribunal recently ordered the KRG to pay the Consortium US$100 million within a timeframe of 30 days by way of a second interim order.

“In default of its legal obligations, the KRG failed to make payment by the stipulated deadline of 17th November 2014 and as a
consequence, the Tribunal’s order became peremptory in nature, enabling its enforcement by the English Court.

“With the Tribunal’s permission, on 12th December 2014, an application to the English Court has been made for enforcement of the order, with the prospect of sanctions being imposed on the KRG for non-compliance.”

But the company said that despite this, and a further multi-billion-dollar claim for breach of contract, which is due to be heard in April of next year, it remains committed to working in the Kurdistan and Iraq, adding:

“[We] sincerely hope that all outstanding contractual matters with the KRG be resolved, amicably and in good faith in the shortest possible time, within the contractual framework”.

“This will in turn enable the full and proper development of the Khor Mor and Chemchemal fields as envisaged by the Contract, for the benefit of the people of the Kurdistan region and all of Iraq.”

(Source: Dana Gas)

(Picture: Dana Gas operations in Iraqi Kurdistan)