U.K.-listed independent oil company Gulf Keystone Petroleum Ltd Wednesday confirmed it had signed two deals to drill for oil in Iraqi Kurdistan along with a subsidiary of Hungary's MOL Nyrt.
Gulf Keystone announced that one of its subsidiaries along with Texas Keystone Ltd of the U.S. and MOL-controlled Kalegran Ltd has signed a production sharing contract, or PSC, to explore and produce in the Shaikan Block, about 85 kilometers Northwest of regional capital Erbil.
The Shaikan Block covers an area of 283 square kilometers and is described by the Kurdish Regional Government, or KRG, as a low exploration risk area.
The Gulf Keystone subsidiary will operate and own 75% in the block. Kalegran will have 20% and Texas Keystone 5%.
In addition, MOL was granted operatorship and a 80% stake in the Akri-Bijeel Block, with the Gulf Keystone unit owning the remaining 20%.
The 889 square kilometers Akri-Bijeel Block is adjacent to the Shaikan Block and is described as a medium exploration risk location by the KRG.
Both PSCs have a duration of 25 years, and an initial three-year exploration phase, Gulf Keystone said in a statement. It added that total expenditure for the two blocks over the next three years will be about $53 million, the majority of which is expected to be incurred over the next six months.
The company plans to acquire 2D seismic data in the first and second quarters of 2008 and drill its first exploration well later in that year.
Evolution analyst Keith Morris said the Iraqi Kurd deal is a good diversification move for Gulf Keystone. "It's take a long time to move forward in Algeria," where the company has its main current assets, he said.
Morris added that the deal is a good way to leverage their Middle-East connections.
Tuesday, the government also signed separate PSCs with Austria's OMV AG and with India's Reliance Energy Ltd.
Iraq is estimated to hold some 115 billion barrels of reserves, making it the third-largest holder after Saudi Arabia and Iran. Though the majority of those reserves are in the south of the country, the Northern KRG is attracting foreign companies simply because it already offers the possibility of signing production-sharing agreements, or PSCs.