Iraqi Oil Exploration – A Diamond in the Ash?

Sunday, Feb 20 2011 by
Iraqi Oil Exploration  A Diamond in the Ash

Iraq is possibly unique among the major oil producing nations insofar as its oil production profile over the last 30 years shows a succession of truly spectacular collapses in production. Depicted on a graph, it resembles the jagged blade of a giant wood- saw.

Since its all-time production peak in 1979, Iraq has of course been subjected to three devastating wars which brought the country to its knees and destroyed key elements of its hydrocarbons infrastructure.

As if this wasn’t enough, the source of the world’s fourth largest oil reserves has experienced a number of other setbacks. Religious and cultural divisions (for example amongst the Shia and Sunni muslims, as well as the Kurds in the north and the Marsh Arabs in the south) continue to create barriers. These divisions are also sometimes reflected in the political landscape. Following the elections in 2010 (when no clear majority emerged), it took over nine months for a coalition government to be formed which delayed and further hindered Iraq’s rebuilding effort.

In addition, Kurdistan continues to govern itself semi-autonomously through the Kurdistan Regional Government (“KRG”), with the result that there are differing oil and gas licensing regimes in Kurdistan and the rest of Iraq. These differences (which have arisen partly from a disagreement over the interpretation of the Iraqi Constitution adopted in 2005), resulted in the oil embargo imposed by Baghdad which has recently frozen exports out of Kurdistan. Another source of friction between Baghdad and Erbil has arisen from the KRG’s preference for a traditional PSC-style licensing arrangement in contrast to the south where a form of technical services contract (the “DPSC”) is more typically used (which rewards participants with a cash fee per barrel of oil recovered rather than with a pre-agreed percentage share of physical oil).

One of the starkest logistical problems facing Iraq relates to the lack of transportation facilities and storage capacity for hydrocarbons – particularly in landlocked (and mountainous) Kurdistan. While a network of ageing pipelines does exist up and down the country, Iraq is still a long way short of the infrastructure which will be required if its current production targets are to be achieved.

Of course security also remains an issue of concern – both as regards safety of employees, as well as security of assets and infrastructure. Hijackings and bombings continue – and there is concern in some quarters over the ability of the…

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Gulf Keystone Petroleum Limited (Gulf Keystone) is a holding company, which is engaged in the oil and gas exploration and production. The Company operates in the Kurdistan Region of Iraq. It operates through segments, including Kurdistan Region of Iraq and United Kingdom. The Kurdistan Region of Iraq segment consists of the Shaikan, Ber Bahr blocks and the Erbil office, which provides support to the operations in Kurdistan. The United Kingdom segment provides geological, geophysical, engineering and corporate services to the Company. It operates in the Shaikan oil field. The Shaikan block is situated over 85 kilometers northwest of Erbil, covering an area of over 280 square kilometers. more »

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BP p.l.c. is an integrated oil and gas company. The Company owns an interest in OJSC Oil Company Rosneft (Rosneft), an oil and gas company. The Company's segments include Upstream, Downstream, Rosneft, and Other businesses and corporate. The Upstream segment is engaged in oil and natural gas exploration, field development and production, as well as midstream transportation, storage and processing. The Downstream segment has global manufacturing and marketing operations. The Rosneft segment has a resource base of hydrocarbons onshore and offshore. The Other businesses and corporate segment comprises the biofuels and wind businesses, shipping and treasury functions, and corporate activities around the world. The Company provides its customers with fuel for transportation, energy for heat and light, lubricants to keep engines moving and the petrochemicals products used to make everyday items as diverse as paints, clothes and packaging. more »

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