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Error
Should of course have read "PF-2 has better road links"
Apologies!
@TM,
1. PF-1 has better road links...to the KAR Refinery "just down the road".
2. The crude grades from PF-2 are well-liked by / more suited to KAR.
3. The cluster of wells feeding PF2 react very badly to being shut-in.
Re the possible re-jigging of the Production Sharing Contract:
Assuming a healthy forward loading of Capex Costs, the current PSC, using say $80/bbl Brent and 50MbopD, generates about $5/bbl Profit Oil (depends on what WI% and Capacity Building Tax etc you plug in to your model).
This is more than double what many of the TSCs in S. Iraq generate.
It therefore seems quite likely that, as Baghdad takes the reins, either a full-blown TSC will be forced upon the Kurd oilies or a hybrid version - both of which will generate less Profit Oil per bbl.
From Euro-Petrole article couple of days ago:
DNO ASA. The Norwegian oil and gas operator, today reported that cumulative oil production from its Peshkabir field in the Kurdistan region of Iraq has broken through the 100 million-barrel milestone less than six years after startup. The field was initially estimated to contain proven and probable reserves of 75 million barrels of oil commingled with associated gas.
In 2020, DNO completed a USD 110 million project to capture, transport and inject the commingled gas into the neighboring Tawke field to achieve the triple goals of reducing greenhouse gas emissions, enhancing oil recovery and saving gas for future use, in what is the first and only such project in Kurdistan.
“Even though Peshkabir has already delivered more oil than we thought it held, we now project that there are at least another 100 million barrels still to be produced from this prolific field,” said DNO’s Executive Chairman Bijan Mossavar-Rahmani. “Team DNO has succeeded in getting oil out of the ground in record time and at industry beating costs while adjusting drainage strategy as understanding of the reservoir grows,” he added.
Mr. Mossavar-Rahmani went on to say that DNO firmly believes there are more Tawkes and Peshkabirs in Kurdistan and that the Company is well positioned to find and tap them. Cumulative oil production from DNO’s currently operated fields is approaching 440 million barrels.
Development of the Peshkabir field continues with the drilling of new wells and initiation of water and gas injection pilot projects to assess additional oil recovery potential. Earlier this month, field production was reduced from about 60,000 barrels of oil per day (bopd) to 43,000 bopd for maintenance workovers, including to replace downhole pumps. Once completed, the Company expects to recover full field production by end April and retains its 2023 production projection of 100,000 bopd for the Tawke license. DNO operates and has a 75 percent stake in this license containing the Tawke and Peshkabir fields with partner Genel Energy plc holding the balance.
The ruling, so we are informed, covers only the period from 2014 thru 2018.
It is therefore to be expected that compensation payment for the later years, 2018 until now, will - in view of the very different (higher) crude prices, be critical in underpining any potential agreement between Iraq and Turkey
Hi Cookie, thank you for that.
Did you notice the Argus report re the ICC ruling just posted? Wonder how this will influence things - I see they're already celebrating down in Basrah:
Iraq wins arbitration over KRG's Turkey crude exports
Published date: 24 March 2023
Share:
Iraq tonight was officially informed by Turkey that an international arbitration court ruled in its favor in the long-running case against Ankara over Kurdish crude exports, a source with knowledge of the matter told Argus, in yet another blow to Iraq's semi-autonomous Kurdish region.
Turkey also said it will not allow shipments carrying crude from the Iraqi Kurdistan region to leave its coastal port of Ceyhan without the consent of the federal government in Baghdad, the source added.
Where does it state that the PSC (term) will be extended?
Good morning,
Approx $67Mio if you use a different $/bbl number.
...the hardware assets (by dint of their Capex costs having been pretty well completely recovered by CO returns) are effectively owned by the KRG, and not by the company?
The contract to develop, the PSC, is of course another matter but even that is thrown open to question when this particular question is answered.
Surely the answer is by how well the company is managing its resource - their ability to produce oil from the SH field?
How open then, once the hardware asset has been removed from the equation, is THAT particular evaluation to be measured - taking into account what other potential developers might claim to be able to achieve?
Once the 55Mbopd target has been achieved, say by end-23, new perpectives open up...
@buzzthomas, to your question:
Shaikan was declared a Commercial Discovery in August 2012.
The Shaikan PSC of 6th Nov 2007 defines the Development Period of the Contract as follows:
A. Clause 6.10. Upon declaration of a Commercial Discovery of Crude Oil, the Contract Term shall be 20 years.
There is an automatic right to a 5-year extension to this period, but it is not clear if such extension has to be requested.
B. Clause 6.12. If, at the end of the initial 20-year Development Period, commercial production of crude oil is still possible, then the Contractor shall be entitled to a further 5-year extension upon request – such request to be made in writing at least 6 months before the end of said development period.
C. The Contractor has the right to terminate production operations at any time during the contract term, subject to giving 90 days’ notice to the Government.
Re A: The first period expires in Aug 2032, in just over 9 years time.
Re B: "commercial production" is not defined and can be interpreted in various ways - considering Capex requirements, etc.
Just for clarity, the assets referredto are those physical assets such as Production Facilities (PFs), hole casings, flow lines, production strings, downhole pumps, wellhead pipework and asemblies such as christmas treess, BOPs, etc, etc.
PSC Clause 20.2. clearly states that title to asets will pass to MNR when their (asset) cost(s) have been completely recovered.
The closer we get to that point the greater the leverage over company decisions the MNR will have.
Unless...the assets are leased, or held by an associate company or contractor.
Cash currently sitting at about $127M - not $185M.
The 2/3 crude streams (Genel/DNO/GKP) are not comparable - neither in terms of quaility (API) nor export price achieved.
I reckon the additional hit to GKP's $/bbl achieved could be about $8/bbl.
The only positive to take out of the price re-basing is that refineries sometimes have to compete quite hard to get the heavy crude they need, so at some point(s) in the future that additional downside will decrease - or even disappear for a short period.
As the agreed, delayed payment terms have now been so effectively trashed, and not for the first time, could the 2022 accounts be qualified?
Lloyds say BP has declared Force Majeure for Ceyhan loadings (Azerbaijan crude loadings) and Inchcape say partial loading of Iraq crude have started...but there is only one tanker currently berthed at the Botas terminal (MS T. Sadberk, 157,453 DWT) and half a dozen still waiting, so it would appear that the Ceyhan export terminal is still not fully finctional.
Various sites now reporting that the epicentre was close to Geziantep in S. Turkey - although close to the Kirkuk-Ceyhan pipeline, sources say the pipeline is undamaged.
The Ceyhan export facility, however, has stopped operations. It's still not clear whether the facility itsself has been damaged or whether a pumpings station has been knocked out.
Other souces report that a gas pipeline in the Geziantepe province has been ruptured and is on fire.
It's being reported by KurdPress that the Paris-based International Court of Arbitration has ruled in favour of the Government of Iraq and against the Kurdish Semi-Autonomous Region KRG in respect of the export of Iraqi oil via the Kirkuk-Ceyhan Pipeline.
https://kurdpress.com/en/news/3309/Paris-court-issues-final-verdict-on-Kurdistan-region's-oil-sale/
@TM,
the widely reported $9/bbl reduction is not clearly explained.
Sarsang crude (at least from the main reported producing formation) is said to be API36 with relatively low S content. SH, as you know, is currently ca. API17 (variable) with high S content (5%+).
My information is that the KBT blend (defined mostly by the higher-grade Khurmala crude, but pulled down by the other Tawke/Atrush/SH/ etc. grades) is about API25 and high S (%S less than SH but more than Khurmala).
All of this is difficult to reconcile with the "$9/bbl reduction" claim...unless, of course, the Distressed Seller discount (KRG being seen as illegitimate seller) continues to be applied to the KBT blend.
This level of speculation is completely unnecessary and could easily be put to bed by the company. The fact that it is not being addressed indicates to me that there is much more to it than meets the eye.
No wonder the major shareholder is rattling the can and I expect more fallout at board level from all of this.
So, was it a Birdie or not?
@TM,
were you driving, or were you collecting your thoughts for a putt?
Seriously, since the Glencore forward financing deal ended, and the Energopole agreement disintegrated following the Ukraine situation and EU sanctions, the term deals have all but collapsed and have mostly been replaced by straightforward spot deals. The threat of sanctions against traders in KBT, combined with the availability of other (Russian) supplies of heavily-discounted sour crude - all combined with the decline in Brent and the OPEC supply uncertainties, has lead to violent swings in dockside prices for KBT.
I would say the the KRG are "over a barrel" at the moment...