Kurdistan steps up efforts to eliminate gas flaring

The Kurdistan Ministry of Natural Resources ("MNR") has asked the Shaikan field partners (Gulf Keystone and MOL) to re-submit a revised FDP for the field to address additional MNR requests on gas management.

The next well planned on the field will now be used to assess the feasibility of gas reinjection into the Jurassic formation, rather than as an originally planned Jurassic production well.

Whilst a key driver to be reservoir management and ultimate recovery rates, it is noted that the MNR is keen to eliminate flaring in Kurdistan.

Gulf Keystone has previously stated that the elimination of gas flaring is the single most complex and expensive component of the field’s development, and additional gas-handling capacity would be required to handle the gas-rich light oil in the underlying Triassic reservoir.

At nearby DNO’s Tawke field, work is scheduled to begin later this year on building the gas-gathering and processing facilities to enable reinjection of Peshkabir’s associated gas into the Tawke field, to reduce flaring and increase the latter recoverable reserves; this gas-gathering and injection system is forecast to be operational in early 2020.

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All Tawke on Peshkabir: Is Tawke production declining?

The Tawke PSC encompasses the Tawke and Peshkabir fields. In 2017, operator DNO commenced production at Peshkabir and in 2018, drilled the Peshkabir-4 and -5 wells taking production up to 30-35mbopd.

However, the limited disclosure by DNO means it is difficult to break out the production on the Tawke PSC between the Tawke and Peshkabir fields. Based on various disclosures between DNO and partner Genel, it appears that production at Tawke is declining, masked by an uptick in Peshkabir.

The Tawke PSC has been producing just c.110mbopd. However closer study reveals that Peshkabir production is now compensating on falling production on the main Tawke field, and hence maintaining the c.110mbopd levels across the PSC.

Although more production history is required, there are now concerns of the problems encountered at TaqTaq by Genel where reserves and production were significantly reduced as water started to be produced from the reservoirs.

#Tawke #Peshkabir #TaqTaq #waterbreakthrough #Kurdistan #DNO #Genel

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Kurdistan payments and new oil sales agreements

Kurdistan producers receive payment for October sales
Gulf Keystone signs new oil sales agreement with the KRG

DNO has reported a payment of USD54 million for Tawke production from the Kurdistan Regional Government. This is in respect of October oil deliveries. The payment will be shared between the licence partners WHO 75% and Genel 25%. Although there is a lag in payments between production and receipt, this is viewed as normal with October sales invoiced in November and approval by the Government in December with payment the following month. The continued stream of payments demonstrates the importance of oil exports to Kurdistan, especially following the independence referendum last year which threw doubt on the region's ability to carry on managing its finances.

In December, DNO reported production from its two field on the Tawke PSC averaged 110mbopd. Production is expected to climb from these levels as operations ramp up at the Peshkabir field. With higher oil prices and continued payment, DNO could begin to undertake infill drilling on the PSC later this year.

Last week, Gulf Keystone also announced that it had agreed a new PSC-linked oil sales agreement with the Government for its Shaikan crude, reinforcing continued progress in the region around oil company activities. Under the agreement, the KRG agreed to buy crude at Brent less USD22/bbl reflecting a quality discount and transportation costs. Kurdistan crude has historically been marketed following a SOMO (Federal Iraq’s State Organisation for marketing of Oil) formula which provides for a discount of c.USD0.4/bbl of API quality. With Shaikan crude at 18˚ (vs. Brent 38˚) suggesting a USD8/bbl discount plus pipeline export costs to Ceyhan estimated at USD4/bbl, the USD22/bbl discount agreed with the KRG seems to be extremely high. This is likely due to additional discounts on Kurdistan originating crude, where the international buyer community could be thin, resulting from political sensitivities of taking on crude from the disputed region.

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