RNS 23rd July9 Apr 2021 11:04
https://www.lse.co.uk/rns/UKOG/entry-into-turkish-oil-project-x3pit06z547voen.html
Rapid success case monetisation
Turkey, which has a c. 91% oil import dependency, actively encourages its domestic oil sector. The right to produce any commercially viable discovered hydrocarbons is enshrined in Turkish Petroleum law. It is a licensee's obligation to produce such discovered hydrocarbons and the law gives an "explorer" the same right to produce during the 5-year exploration phase as if the Licence were in a production phase.
Monetising a successful oil well in Turkey is therefore potentially rapid and largely in the control of the operator, as the completed well can be put on long-term production directly from a flow test and well completion. Permanent production can therefore be accomplished as soon as practicable, taking months rather than the 3-5 years it takes in the UK onshore.
The Turkish petroleum fiscal regime is also amongst the most globally competitive, giving a licensee a post-tax share of production revenues of around 60.5% (inclusive of a 5% withholding tax for repatriated profits to a foreign parent company). The comparable UK post-tax share is 60%.
Turkish petroleum law also guarantees that any domestically produced oil must be accepted by Turkish refineries and purchased at market price. Crude prices are benchmarked to Arab Medium or Arab Heavy, dependent on oil density/API gravity and are approximately equivalent to or marginally higher than Brent crude, the UK benchmark.
Drilling costs are also forecast to be significantly lower than for a comparable well in the UK. AME's cost estimates for a 1500 m depth well in the Licence are around $3 million gross. The equivalent well in the UK would cost the Company £5-6+ million gross.
Any future oil production is therefore expected to be economically robust at current $40/bbl oil prices as front end capital costs per barrel are relatively low and expected operating costs, derived from those at AME's nearby East Sadak field, are forecast to be comparable with UKOG's Horse Hill field operating costs at around $15/bbl. An equivalent production stream in Turkey will therefore pay back far quicker than in the UK.
As per nearby fields, any future oil production will be exported via road tanker to the nearest oil refinery at Batman, approximately 50 miles (80 km) from the Licence, around half the distance of UKOG's Horse Hill field's export route to Perenco's Hamble facility.
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