Baghdad, Arbil fail to reach deal on oil sharing

Friday, November 18, 2011

İPEK YEZDANİ - ipek.yezdani@hurriyet.com.tr

ISTANBUL - Hürriyet Daily News

Baghdad and Arbil have failed to reach a deal on oil sharing while a top Iraqi official slams an oil agreement signed between northern Iraq and Exxon Mobil

Iraq’s deputy prime minister for energy, Hussain al-Shahristani (L) has told Hurriyet Daily News reporter İpek Yezdani that the Iraqi government does not recognize the oil agreement signed between northern Iraq and Exxon Mobil. DAILY NEWS photo, Emrah GÜREL

Tensions related to oil sharing between Baghdad and the Kurdistan Regional Government (KRG) is rising in the wake of the latter’s decision to sign a new deal with Exxon Mobil on hydrocarbon exploration.

Iraq’s deputy prime minister for energy, Hussain al-Shahristani, said the Iraqi government did not recognize the oil agreement signed between the KRG and Exxon Mobil in northern Iraq.

“The Iraqi government has made it very clear that any contract not approved by the Iraqi government is not legal. Companies have no right to work in Iraqi territory without the approval of the Iraqi government. This position has been made very clear and the prime minister and minister of oil have also reflected this opinion to the company,” al-Shahristani told the Hürriyet Daily News in an interview on Nov. 17 on the sidelines of the Black Sea Energy and Economic Forum in Istanbul, which was organized Nov. 17 and 18.

Asked whether or not Exxon Mobil could operate in southern Iraq after signing the contract with the KRG, al-Shahristani said: “I am not going to make a prediction on that. I am just saying this contract is not approved by the Iraqi government and is not legal.”

The KRG has rejected a draft oil and gas law approved by the Iraqi government in August as the region believes the proposal gives too much power to the federal government to manage the country’s oil wealth.

Al-Shahristani said the new hydrocarbon law, drafted in 2007, had not yet been legislated. “The Iraqi government, after four years of waiting, has revised that draft and added some amendments to it, approved the law and sent it to parliament,” said al-Shahristani. ”In the past, it took four years to revise it; I hope this time it will be faster.”

Royal Dutch Shell has pulled out of oil-development talks with the KRG in an effort to protect lucrative investments in southern Iraq, the Financial Times reported Nov. 17. “Shell always stated that they respect the Iraqi laws and they will not sign an agreement without the approval of the Iraqi government,” al-Shahristani said.

Shell, Mitsubishi to look for Basra gas

Iraq’s Cabinet has approved a proposal by Royal Dutch Shell and Japan’s Mitsubishi Corp. to jointly develop natural gas facilities in the country through a joint venture dubbed Basra Gas Co., al-Shahristani said.

Most of the natural gas in Iraq is flared because the country lacks the technology to contain the resource.

Shell will focus on the capture of the flared natural gas at facilities near Iraq’s southern port in Basra, he said. “Iraqi government will have the majority share and 49 percent of the company will be divided between Shell and Mitsubishi,” he added.

Iraq to sell gas to Turkey in the future

Al-Shahristani said Turkey was Iraq’s major trading partner. “We supply a significant portion of the Turkish demand for oil, and, in the future, gas will be available from Iraq,” he said.

“We know Turkey depends on Iraq for energy, and Iraq is determined to be a partner in supplying the energy and developing of the Middle East region into a very prosperous region,” al-Shahristani said.

“Saddam [Hussein] left Iraq destroyed. We have undertaken massive construction. We strongly advise all Turkish companies to look at investment opportunities in all parts of Iraq,” he said.

Friday, November 18, 2011

====================

Re: GKP GONE IN 2011 AROUND £5
renardargente
20
Opti; Why would any ( I mean any ) investor sell when the political see-saw just had a 1000-pound gorilla dumped on our side of the beam? Why would any investor sell when we are close to firming up the hi-side OIP of Shaikan? Why would any investor sell when a structure much bigger than even Shaikan has a GKP/Genel exploration well poised just above the first reservoir zones. Remember the day when Shaikan-shallow was announced... Why would any investor sell when we are about to get a proxy main FTSE valuation via Genel//Vallares? Why would any investor sell when the available acreage in Kurdistan has just been mopped up by said gorilla?

Why would any investor listen to arrant £5 per share T/O p|sh....?

Opti; I'm with you on the 'lalalala... not listening'

==============

PETRONAS resumes digging 3rd well in Gharaf Oil Field
11/19/2011 11:03 AM
http://en.aswataliraq.info/Default.aspx?page=article_page&c=slideshow&id=145654
THI-QAR / Aswat al-Iraq: THe Malisian PETRONAS Oil Company has started on Saturday digging the 3rd oil well in Gharraf Oil Field north of southern Iraq's Nassiriya

City, the center of Thi-Qar Province, the Oil Field Section's Assistant Director in Thi-Qar Province reported.



"PETRONAS has began digging the 3rd well in the Garraf Oil Field, within 11 wells, the Company is planning to dig," the Section's Assistant Director, Khalil Rashid, told Aswat al-Iraq news agency, expressing hope that its initial production would be 35,000 barrels per day next year.



The Economic Analyist, Salah Ghani al-Husseiny, told Aswat al-Iraq that the Iraqi Government had announced plans to develop and raise Thi-Qar Province's production

To reach more than 50,000 barrels per day from Nassiriya Oil Field alone.



Iraq's Prime Minister, Nouri al-Maliki, had announced on 3/1/2010 that expectations pointed out that "Iraq's oil production would reach 11 million and 400,000 barrels per day in 2015.



The Malaisian National Oil Company "PETRONAS" and the Japanese Petroleum Excavation Company (JAPEX) had signed on Monday, 20/12/2009, a preliminary agreement with the Iraqi government to develop southern Iraq's Gharraf Oil Field with investments, expected to reach US$8 billions (b).



PETRONAS possesses 60% of the project, with 40% by JAPEX, and the agreement is a long-range contract that continues for 20 years.



Both Companies shall get an interest of 1.49 dollars per barrel, and have committed themselves to raise the oil field's production to 330,000 barrels per day, according to PETRONAS Director-Genera, Wang Kin, within 10 oil fields planned for development with in the 2nd Iraqi Oil Contacts Consignments, led by the United States in 2003.



Thi-Qar Provinces possesses an oil reserve, estimated at 20 billion (b) barrels, within 5 oil fields that are not invested, including the Grand Nassiriya Oil Field at Gute'a Area, 30 km to the northwest of Nassiriya, expected to produce 300,000 barrels per day (bpd), with an expected productivity potential of one million barrels per day after its

Completion.



The other oil field is the Gharraf Oil Field, 25 km to the north of Nassiriya, expected to produce 130,000 bpd, the Rafidain (Abu-Amoud) Oil Field, with a production capacity upon its commissioning to reach 110,000 bpd, whilst the gas reserve in the Province that lies in the oil fields, had not been estimated yet., at a time when special teams had started their activity west of north of the Province to discover new oil fields.



Nassirya, the center of Thi-Qar Province, is 365 km to the south of Baghdad.

=========================

Majnoun reaches 76,000 barrels a day
19/11/2011 12:56
http://www.aknews.com/en/aknews/2/273302/

Baghdad, Nov. 19 (AKnews) - Royal Dutch Shell announced Saturday that production at the Majnoun field reached 76,000 barrels per day.

The company said it will take two dollars for each barrel of oil at the end of next year after production reaches 170,000 barrels. "Shell doesn't spend any amount of money without the approval of the Iraqi government and the company is working according to Iraq's low financial resources," an executive said.

In September Reuters reported Shell's claims that Majnoun was producing 75,000 barrels of oil daily. That was up 10,000 barrels from June this year.

Iraq signed a series of contracts with international oil companies to increase the production capacity to 12 million barrels by 2017. The Iraqi Oil Minister Abdul Karim Luaibi stated recently that producing between eight million and 8.5 million barrels per day would be more appropriate than 12 million.

=================

Wed 14:34	Re: ExxonMobil - Reuters	GKP.L	78
	Sometimes you cannot help but wonder whether Mr Shahristani does genuinely have the interests of his people at heart at all, or if he is simply on some kind of personal crusade to alienate almost everyone he deals with – the Kurdish people, his political opponents, and the foreign Oil companies who bring billions of dollars worth of investment into Iraq! The article below from the Wall Street Journal in November 2009 gives an indication of THE BIDS that were received for West Qurna-1, when the contract was eventually awarded to Exxon and Shell. http://online.wsj.com/article/SB125741092983330293.html Extract: < “After rejecting the oil ministry's payment terms as too stingy during a June auction, the three competitors for West Qurna later accepted the ministry's original $1.90-per-barrel payment. The fee will be paid for additional oil extracted above current production levels. Originally, Exxon asked for a $4-per-barrel payment, while the Lukoil consortium proposed $6.49 a barrel. The CNPC team proposed $2.60 a barrel. West Qurna-1 is believed to have about 8.7 billion barrels in oil reserves.”> It was obviously a very tough contract, based on $1.90 per barrel for production IN EXCESS OF what was then about 244,000 barrels per day. This EXCESS works out as about 6.9 billion recoverable barrels that were left to be produced over the 20 year term of the contract. So, if Shahristani does succeed in annulling the Exxon contract at West Qurna-1, realistically he can at best hope to find another oil major that will take on the contract for $2.60 per barrel. Already, it is very apparent that the costs to Iraq would be escalating, due to the stubborn-ness of Shahristani’s position. And where would that leave Shell - I am sure they would require their 16% Net WI in the contract to be re-negotiated to $2.60 per barrel too! According to my calculations, with 6.9 billion barrels of reserves left to be extracted in excess of current levels, that will cost Iraq a MINIMUM of 6.9 billion x ($2.60 – $1.90) = $4.8 BILLION extra. And even that assumes that they can somehow find another ‘major’ to whom the concept of working with the ICG for $2.60 per barrel is still regarded as appealing - I doubt very much that they will! Alternatively, the only other bidder wanted $6.49 PER BARREL 2 years ago to develop West Qurna-1, which is almost as much as the net amount of PROFIT oil under the Shaikan PSC, which includes Exploration risk. (Note: the comparison is very striking when you think that Iraq is intending to offer exploration contracts in early 2012.) In that event, it would cost Iraq 6.9 billion x ($6.49 - $1.90) = $31.7 BILLION over the lifetime of the project, almost the same as the level of Investment which Exxon has promised to commit to the West Qurna-1 development as it stands. When the Iraqi policy makers take the time to pore over these figures, I think they will find them very revealing, as they will soon show just how completely oblivious and out of touch Shahristani is as to the amount of money that his Obstinacy is costing the Iraqi people. Remember too that this is also the man who supposedly oversees in minute detail every single Energy deal that is signed under his watch. The figures don’t lie! Every minute that this man remains in charge of Oil & Electricity policy in Iraq, he is costing its citizens a small fortune, and setting back for years the chance that they will enjoy the prosperity that they deserve... and that Iraq’s oil wealth can (and should) give them. A recent article from AK News suggested that Shahristani is under pressure from all sides –it looks to me now like that pressure will soon also be coming from above and below... and that his position will soon be almost untenable. GLA, scaramouche ================================== IMECHE Firstly, why did Exxon not wait until the year end when the Oil and Gas law was in place, or supposed to be in place. Surely 10 weeks was worth waiting for, in view of their interests in the south being threatened by the ICG. I believe the reason was because they were given the nod that the new Oil and Gas Law will see the end of PSC`s in the north and will be replaced by TSC`s, probably starting from 1/1/12. Existing PSC`s will stay and be valid and only TSC`s will be granted going forward. By allowing this to happen The ICG will get their face saving TSC`s and look like they have gotten their way, whereas in reality most of blocks have already gone the way of the Kurds(ie PSC`s) and it does not matter until 25/30 years down the road when the renewals come up for grabs and who knows what state Iraq/Kurdistan will be in then. So Exxon have moved in now and get the more lucrative PSC`s whereas in 2012 they would only get TSC`s. In the meantime the two governing bodied have a bit of a bun fight but know that a deal that will suit both is going to happen at the year end. ====================== Author theperpetualoptimist View Profile Add to favourites Ignore Date posted today 11:42 Subject Using the PSC to value Shaikan Votes for this Posting Voted 10 times. Message The old timers will remember how long we spent trying to value each successive increase in the Shaikan OIP without our actually having access to the contract showing the terms under which GKP was working. And then in September the PSC was published and we at last found out the exact legal terms including the famous “R” factor. It seemed too good an opportunity to miss so I decided to create a full spreadsheet to value Shaikan using the exact terms of the PSC. The results have been most satisfactory and I can now input any changes in assumptions and get an accurate financial outcome. To check that I had not made any fundamental errors, I circulated the spreadsheet to a few of our experts and so far the reaction has been that the conclusions from my spreadsheet are credible. I am aware of one other PI who has carried out a similar exercise and I assume that all the potential predators (Exxon, Chevron and Total IMHO) plus Ewan have something similar. What I want to do here is share the main conclusions from the exercise. I am going to go into quite a lot of detail because this post is aimed at newcomers to GKP as much as at the old timers. As has recently been said, potential investors will be comparing Genel and GKP and this is my contribution to the discussion of why GKP is such good value. 1) A reminder of the key PSC terms (The Shaikan PSC can be read on the KRG web site). Once the field is established, GKP or its successor as operator will extract the oil from Shaikan and send it via a pipeline in Kurdistan to a delivery point where it will be fed into an Iraqi or Turkish pipeline to go to market. According to the PSC, at the delivery point, the contractor group takes ownership of its share of the oil. Initially the KRG takes a 10% royalty on all the oil that is produced. The oil which remains is divided into “Cost” oil and “Profit” oil. The contractor group gets back its spending (the variable extraction costs and the capital expenditure including on pipelines) via Cost oil and then gets its profit from the Profit oil. Repayment of costs as Cost oil is limited to a maximum of 40% of the oil left after deduction of the initial royalty. If there is more Cost due for repayment than can be recovered in any one period, because of the 40% cap, then that Cost can be reclaimed in subsequent periods. The amount of Profit oil is determined by a sliding scale. Initially it is 30% of the available oil after the initial royalty is deducted but it drops to 15% over time. The rate at which it moves from 30% to 15% is determined by a sliding scale formula which is based on the amount of cumulative revenue received from the repayment of costs and profit divided by the cumulative costs incurred. The result of this calculation is called “R”. When R is less than 1 in the previous period, then profit oil in the current period is paid at 30%. When R is greater than 2 in the previous period, then the profit oil payment in the current period is 15%. In between you use a sliding scale. In the Shaikan PSC, the periods are “semesters” of six months. The level of profit oil payment in the current 6 month semester is based on the value of R in the last 6 month semester. . Whatever figure comes out of the calculation as the Profit oil amount is then reduced again by a 40% Capacity Charge. This reduction is not a term of the original PSC but was agreed in the amendment to the PSC associated with the exit of Etamic. The final reduction is that the contractor group makes various lump sum payments to the KRG as cumulative production passes certain thresholds. These are called Production Bonuses. Going in the other direction, the constructor group will receive back the appropriate share of past capital expenditure when the 15% 3rd party back in rights are sold by the KRG. 2) Key assumptions in my spreadsheet. The PSC terms are part of valuing Shaikan but obviously you also need to know how much oil will be extracted and what the cost will be of extracting it. Luckily at the Half Year results presentation, we got much of that information. Todd spoke of his expectation that Shaikan could produce between 400K and 600K barrels per day and my spreadsheet assumes a peak of 500K being reached in 2020, 8 years into the development period. Because all oil fields decline eventually, I have also factored in a 3% pa decline in production after year 20 of the development period. My assumptions lead to the conclusion that In September Todd believed that about 4.5 billion barrels will be extracted during the PSC and this is what I have in the spreadsheet. For reference, 4.5b barrels extracted could be expressed as an OIP of 15bbs with a 30% recovery factor or an OIP of 18bbs with a RF of 25%. These figures are higher than current RNS figures but we know there is much more to come from Shaikan. This week John G, in his podcast, says there is another 2 bbs in the cretaceous and we haven’t poked the Permian yet. If you want to be more cautious and use the current P50, I have put that figure in at the end in the sensitivity section. The Half Year presentation also gave us details of the likely scale of the capital investment required to extract the oil. John G spoke of a $7b or $7.5b programme spread over up to 6 years. And the company has given us the variable lifting costs both now, while trucking, and in the future when using a pipeline. Other key assumptions are the price of oil at the delivery point for which I have used $100 (though $50 upto mid 2012). And I have taken 1st January 2013 as the date when the 30 year development period (20 years plus two 5 year extensions) starts. As always, I am using 54.4% as GKP’s fully diluted share of Shaikan as I include the TKI interest. I have made no allowance for the gas in Shaikan as there are different sets of calculations for that but the gas value should be added to my figures. 3) Spreadsheet conclusions The key finding is that Profit oil as a percentage of gross oil production is around 7.8%. Using different investment and production assumptions I can alter this figure a little but it stays within a 7.5% to 7.9% bracket. So for every barrel of oil that is sold for $100, GKP will receive around $7.80 in profit. The second main conclusion is the value for GKP of Shaikan. GKP’s undiscounted share of the Shaikan revenue over the 30 year PSC is $7.9b or £5b. With 854m shares in issue, this is £14.39 per share. However as this stream of income comes in over 30 years, we should impose some discount factor on it to bring it to a net present value. Goldman Sachs has said that NOCs are paying for oil assets using a 6% discount. Using this discount (and assuming that the discount starts in H2 2012) then the value to GKP of Shaikan is £5.93 per share. So, on my assumptions GKP’s oil interest in Shaikan is worth £14.39 per share undiscounted and £5.93 per share discounted to which the value of the gas should be added. Those of you who wish to apply a Chance of Success or political risk factor should do so to these figures. The PSC is designed to reward companies that invest heavily early on. This is clearly in the interests of the KRG because the more early investment there is, the sooner the oil is extracted. So by making big early capex, the contractor group keep “R” low and hence the Profit oil percentage nearer 30% than 15%. So when John G talks about the development plan requiring $7b or $7.5b of capex in the first few years, a sum of this size is to GKP’s advantage. Early on the more capex that is invested, the more profit GKP makes because capex holds down “R”. However, once “R” reaches 2 then whatever investment the constructor group makes will not increase the Profit oil payment. The benefit to profits from heavy early capex is one reason why the super majors will see an advantage in taking control of Shaikan sooner rather than later. Using my assumptions, “R” stays below 1 for the first two years of the development plan and then gradually increases so that it goes above 2 in year five of the plan. I have seen some concern about the possible dilution that might result from the huge Shaikan capex programme that John G outlined. Even if GKP were to remain as a contractor, I can reassure on that score. The PSC is designed so that the 40% Cost oil repayment together with the 30% level of profit early on, generate huge cash flows to the contractor group. For instance I believe that 2013 will be the year with the largest negative cash flow but even here, the amount of that cash flow that GKP would need to provide is only around $150m. By year 3 of the development plan, 2015, cash flow is positive, even with a projected $1.4b capex in that year. 4) Sensitivity I have based my figures on the extraction of 4.5b barrels over the term of the PSC. This is equivalent to an OIP of 15b barrels and a recovery factor of 30%. If you reduce the OIP to the current P50 of 10.5b barrels but keep the 30% recovery, then the undiscounted value of GKP’s interest falls from £14.39 per share to £10.33 per share. The profit per barrel remains constant at around 7.8%. Altering the variable extraction costs alters the profit percentage. So, while a long term average extraction cost of $3 per barrel delivers a 7.8% profit, if extraction costs were to be $6 per barrel then the profit drops to 7.5%. The factor which has the most effect on the profit (other than the amount of oil extracted) is the price of oil. My figures assume the oil is sold for $100 at the delivery point from mid 2012 onwards. At an oil price of $80 per barrel Shaikan’s undiscounted value to GKP falls from £14.39 per share to £11.59 per share. On the up side, if you, like me, believe peak oil is credible, then an oil price of $120 takes the undiscounted share value of GKP’s oil in Shaikan to £17.19 and the discounted value to £7.07. And then there is the gas….. In a week when the traders have had fun, I will leave the investors who are concerned more with the long term fundamentals to ponder those last thoughts. TPO Chopper correctly spotted the error, in the conclusion section, I put the dicounted figures in but called them undiscounted. Here is the correct version..... The old timers will remember how long we spent trying to value each successive increase in the Shaikan OIP without our actually having access to the contract showing the terms under which GKP was working. And then in September the PSC was published and we at last found out the exact legal terms including the famous “R” factor. It seemed too good an opportunity to miss so I decided to create a full spreadsheet to value Shaikan using the exact terms of the PSC. The results have been most satisfactory and I can now input any changes in assumptions and get an accurate financial outcome. To check that I had not made any fundamental errors, I circulated the spreadsheet to a few of our experts and so far the reaction has been that the conclusions from my spreadsheet are credible. I am aware of one other PI who has carried out a similar exercise and I assume that all the potential predators (Exxon, Chevron and Total IMHO) plus Ewan have something similar. What I want to do here is share the main conclusions from the exercise. I am going to go into quite a lot of detail because this post is aimed at newcomers to GKP as much as at the old timers. As has recently been said, potential investors will be comparing Genel and GKP and this is my contribution to the discussion of why GKP is such good value. 1) A reminder of the key PSC terms (The Shaikan PSC can be read on the KRG web site). Once the field is established, GKP or its successor as operator will extract the oil from Shaikan and send it via a pipeline in Kurdistan to a delivery point where it will be fed into an Iraqi or Turkish pipeline to go to market. According to the PSC, at the delivery point, the contractor group takes ownership of its share of the oil. Initially the KRG takes a 10% royalty on all the oil that is produced. The oil which remains is divided into “Cost” oil and “Profit” oil. The contractor group gets back its spending (the variable extraction costs and the capital expenditure including on pipelines) via Cost oil and then gets its profit from the Profit oil. Repayment of costs as Cost oil is limited to a maximum of 40% of the oil left after deduction of the initial royalty. If there is more Cost due for repayment than can be recovered in any one period, because of the 40% cap, then that Cost can be reclaimed in subsequent periods. The amount of Profit oil is determined by a sliding scale. Initially it is 30% of the available oil after the initial royalty is deducted but it drops to 15% over time. The rate at which it moves from 30% to 15% is determined by a sliding scale formula which is based on the amount of cumulative revenue received from the repayment of costs and profit divided by the cumulative costs incurred. The result of this calculation is called “R”. When R is less than 1 in the previous period, then profit oil in the current period is paid at 30%. When R is greater than 2 in the previous period, then the profit oil payment in the current period is 15%. In between you use a sliding scale. In the Shaikan PSC, the periods are “semesters” of six months. The level of profit oil payment in the current 6 month semester is based on the value of R in the last 6 month semester. . Whatever figure comes out of the calculation as the Profit oil amount is then reduced again by a 40% Capacity Charge. This reduction is not a term of the original PSC but was agreed in the amendment to the PSC associated with the exit of Etamic. The final reduction is that the contractor group makes various lump sum payments to the KRG as cumulative production passes certain thresholds. These are called Production Bonuses. Going in the other direction, the constructor group will receive back the appropriate share of past capital expenditure when the 15% 3rd party back in rights are sold by the KRG. 2) Key assumptions in my spreadsheet. The PSC terms are part of valuing Shaikan but obviously you also need to know how much oil will be extracted and what the cost will be of extracting it. Luckily at the Half Year results presentation, we got much of that information. Todd spoke of his expectation that Shaikan could produce between 400K and 600K barrels per day and my spreadsheet assumes a peak of 500K being reached in 2020, 8 years into the development period. Because all oil fields decline eventually, I have also factored in a 3% pa decline in production after year 20 of the development period. My assumptions lead to the conclusion that In September Todd believed that about 4.5 billion barrels will be extracted during the PSC and this is what I have in the spreadsheet. For reference, 4.5b barrels extracted could be expressed as an OIP of 15bbs with a 30% recovery factor or an OIP of 18bbs with a RF of 25%. These figures are higher than current RNS figures but we know there is much more to come from Shaikan. This week John G, in his podcast, says there is another 2 bbs in the cretaceous and we haven’t poked the Permian yet. If you want to be more cautious and use the current P50, I have put that figure in at the end in the sensitivity section. The Half Year presentation also gave us details of the likely scale of the capital investment required to extract the oil. John G spoke of a $7b or $7.5b programme spread over up to 6 years. And the company has given us the variable lifting costs both now, while trucking, and in the future when using a pipeline. Other key assumptions are the price of oil at the delivery point for which I have used $100 (though $50 upto mid 2012). And I have taken 1st January 2013 as the date when the 30 year development period (20 years plus two 5 year extensions) starts. As always, I am using 54.4% as GKP’s fully diluted share of Shaikan as I include the TKI interest. I have made no allowance for the gas in Shaikan as there are different sets of calculations for that but the gas value should be added to my figures. 3) Spreadsheet conclusions The key finding is that Profit oil as a percentage of gross oil production is around 7.8%. Using different investment and production assumptions I can alter this figure a little but it stays within a 7.5% to 7.9% bracket. So for every barrel of oil that is sold for $100, GKP will receive around $7.80 in profit. The second main conclusion is the value for GKP of Shaikan. GKP’s undiscounted share of the Shaikan revenue over the 30 year PSC is $19.6b or £12.3b. With 854m shares in issue, this is £14.39 per share. (This is a correction to the earlier post where I put in the discounted figures in the above paragraph) However as this stream of income comes in over 30 years, we should impose some discount factor on it to bring it to a net present value. Goldman Sachs has said that NOCs are paying for oil assets using a 6% discount. Using this discount (and assuming that the discount starts in H2 2012) then the value to GKP of Shaikan is £5.93 per share. So, on my assumptions GKP’s oil interest in Shaikan is worth £14.39 per share undiscounted and £5.93 per share discounted to which the value of the gas should be added. Those of you who wish to apply a Chance of Success or political risk factor should do so to these figures. The PSC is designed to reward companies that invest heavily early on. This is clearly in the interests of the KRG because the more early investment there is, the sooner the oil is extracted. So by making big early capex, the contractor group keep “R” low and hence the Profit oil percentage nearer 30% than 15%. So when John G talks about the development plan requiring $7b or $7.5b of capex in the first few years, a sum of this size is to GKP’s advantage. Early on the more capex that is invested, the more profit GKP makes because capex holds down “R”. However, once “R” reaches 2 then whatever investment the constructor group makes will not increase the Profit oil payment. The benefit to profits from heavy early capex is one reason why the super majors will see an advantage in taking control of Shaikan sooner rather than later. Using my assumptions, “R” stays below 1 for the first two years of the development plan and then gradually increases so that it goes above 2 in year five of the plan. I have seen some concern about the possible dilution that might result from the huge Shaikan capex programme that John G outlined. Even if GKP were to remain as a contractor, I can reassure on that score. The PSC is designed so that the 40% Cost oil repayment together with the 30% level of profit early on, generate huge cash flows to the contractor group. For instance I believe that 2013 will be the year with the largest negative cash flow but even here, the amount of that cash flow that GKP would need to provide is only around $150m. By year 3 of the development plan, 2015, cash flow is positive, even with a projected $1.4b capex in that year. 4) Sensitivity I have based my figures on the extraction of 4.5b barrels over the term of the PSC. This is equivalent to an OIP of 15b barrels and a recovery factor of 30%. If you reduce the OIP to the current P50 of 10.5b barrels but keep the 30% recovery, then the undiscounted value of GKP’s interest falls from £14.39 per share to £10.33 per share. The profit per barrel remains constant at around 7.8%. Altering the variable extraction costs alters the profit percentage. So, while a long term average extraction cost of $3 per barrel delivers a 7.8% profit, if extraction costs were to be $6 per barrel then the profit drops to 7.5%. The factor which has the most effect on the profit (other than the amount of oil extracted) is the price of oil. My figures assume the oil is sold for $100 at the delivery point from mid 2012 onwards. At an oil price of $80 per barrel Shaikan’s undiscounted value to GKP falls from £14.39 per share to £11.59 per share. On the up side, if you, like me, believe peak oil is credible, then an oil price of $120 takes the undiscounted share value of GKP’s oil in Shaikan to £17.19 and the discounted value to £7.07. And then there is the gas….. In a week when the traders have had fun, I will leave the investors who are concerned more with the long term fundamentals to ponder those last thoughts. TPO ================================ Project: Overview Phases 1 to 3 • International consortium led by PetroChina won Halfaya Oilfield Development & Production Service Contract in January, 2010 to develop Halfaya Oilfield to reach production capacity of 535MBOPD (535,000 Barrel Oil Per Day). • Halfaya Oil Fields is situated in Missan governorate, 35 km southeast of Amarah city. Discovered in 1976, the field is about 30 km long and 10 km wide. Preliminary development of the Halfaya field has supported limited production from 4 wells with the field currently producing about 3,000 BOPD. The project will be carried out in three phases Total Investment ca. $7,000 Million USD • Phase 1: First Commercial Production (FCP) to reach production capacity 70,000BOPD • Phase 2: To reach 300,000BOPD production capacity • Phase 3: To reach Plateau Production Target 600,000B ================================= 09-11-11 Re: Shaikan - how much will be extracted... GKP.L 41 Jack Diamonds, A slow reply to your question of 20.24 yesterday. Yes, isn't it interesting? And the clauses are, I think, clear. The 30th June 2011 has come and gone and we have not been informed of the KRG nominating anyone to take up the BiRs so, on the face of it, the right of the KRG to nominate a third party to take the Shaikan BiRs has lapsed. According to the agreement those BiRs are now to be split between the KRG and the contractor group so GKP would get its share of half of the 15%. BUT I simply don't believe that the KRG would give up the chance to sell the BiRs to Shaikan. They would be crazy to give up that immediate revenue. I think it much more likely that the contractors have given the KRG an extension on the 30th June deadline and we, in the mushroom farm, have not been told. And while I would have liked to have been told, I am not complaining about the extension as it suits both parties. The KRG knows that a six or nine month wait will allow it to sell the BiRs for vastly more than it could have got in June 2011 and GKP knows that it will benefit from the market seeing the BiRs being sold for much more and it does not need the cash back from the prior capital spending at present. Plus I think that by giving the KRG a further extension it gets a few more brownie points with the KRG that help to secure its defenses against an unwelcome early bid. The further extension of the deadline could be worth hundreds of millions of dollars to the KRG and that is something that I am sure the KRG will be tactfully reminded of if GKP needs a favour. The relationship with the KRG is governed both by the PSC terms but also by the personal relationship between the parties and I have no doubt that Todd puts a great deal of effort into maintaining excellent relations with the KRG. TPO

08-11-11	Shaikan - how much will be extracted?	GKP.L	101
	As the OIP numbers increase, we have seen some posts on the likely recovery factor for Shaikan. As I’m not technically qualified, I can’t contribute so I’ll wait for the expert report which we have been told will come early next year. But the recovery factor (RF) is just a means to an end. Actually what we want to know is how much oil can be extracted during the lifetime of the PSC. This is the all important figure which will allow us, in conjunction with the PSC terms, to value GKP’s interest in Shaikan.. The quantity of oil that can be extracted is a product of the OIP, the average RF, the speed of ramping up extraction and the length of the contract. That’s four elements with only one of them (the PSC length) a certainty. Luckily, from various things that have been said we can work out roughly what GKP thinks can be extracted during the PSC. Clue 1 – Todd said (at the September presentation) that he believes Shaikan can produce between 400,000 and 600,000 barrels of oil per day. For the purpose of this note I’ll take the mid point of 500k barrels per day. So now we need to know how long Shaikan can do this for. Clue 2 – John G told us that the development plan would probably see substantial capital investment continue for at least 6 years. So it will take many years to reach the peak of production. I will assume that it takes a conservative 8 years from the start of the development plan to reach the production peak. That would be just over 9 years from now and over 11 years after oil was first found in Shaikan. Clue 3 – And at the other end of Shaikan’s life, we know that extraction tends to decline at about 3% pa in the later stages of a field’s life. Let’s assume that this decline starts after 20 years of extraction. Clue 4 – And we now know that the Shaikan PSC can be up to 30 years in length once the development period starts. If you put this all together into a spreadsheet lasting the full length of the PSC you will find that GKP believes that Shaikan can produce roughly 4.5 billion barrels of oil before the end of the PSC. This would be the equivalent of 15bbs OIP with a RF of 30% or 18bbs OIP with a RF of 25% (John G talked about a 30% RF in September). So this back check shows that 4.5 billion barrels is a sensible number given how much of Shaikan is still unexplored. I always use a GKP working interest in Shaikan of 54.4% because we have been told that the TKI share belongs to GKP. And 54.4% of 4.5 billion barrels is 2.45 billion barrels. So 2.45 billion barrels is the amount that I believe GKP expects it could extract from Shaikan for its own working interest during the lifetime of the PSC if it remains the operator….which, of course, it will not. I expect to see major announcements at the Erbil conference which will fire the starting gun on the end game. After the conference I will post a Shaikan valuation based on the actual PSC terms and the extraction of this 2.45 billion barrels. TPO

27-10-11	The Super Majors and GKP	GKP.L	184
	I have always assumed that an NOC would be the most likely purchaser of GKP and Goldman Sachs hinted at this when it showed that NOCs tend to pay more for acquisitions than IOCs. However there have been persistent rumours of IOCs going into Kurdistan and now we have virtual confirmation with a statement posted at 9.26 this morning by Hope Eternal quoting a comment from Barham Salih, the Kurdish PM. In that statement Barham Salih spoke of the arrival of major oil companies soon in Kurdistan. So I thought I would look at what the impact would be on a few of the Super Majors of them buying GKP. And just for variety, I thought I would look specifically at the impact of an all share deal. I have done it this way because I want to remind the company that for many of us an all share deal in a liquid stock could be highly desirable. Cash could easily be realized for those that want it and capital gains taxes reduced for many PIs by deferring the sale of shares over time. So an all share deal from, say BP, might be worth more than cash to many of us. So I looked at three Super Majors and asked what the impact would be for them of buying GKP with shares. For the purpose of this analysis I have assumed an all share takeover valuing GKP at £10 per share (and 900m shares in issue) so a valuation of £9b or $14.4b. Personally I believe the price paid will be even higher. 1) BP Has issued 21.6b shares (including Rosneft) and has 36b authorized. To acquire GKP for £10/share it would need to issue 193m shares or 13% of shares available for issue. The dilution to existing shares would be 9%. In 2010 BP produced about 3.8m barrel/day so if we take Todd’s statement that Shaikan alone could pump 400K to 600K barrels/day then in return BP would get a boost to production of around 13%. And then there is the production from the other three licenses to consider…. 2) Exxon Has issued 8b shares out of an authorized total of 9b shares. To acquire GKP for £10/share it would need to issue a further 178m shares or less than 20% of the shares available for issue. Such an issue would dilute Exxon’s existing shares by a tiny 2.2%. In 2010 Exxon produced 2.4m barrels/day so if Shaikan alone could pump 400K to 600K barrels/day then in return Exxon would get a minimum 20% boost in production. 3) Chevron Chevron has issued 2b shares and has 4b authorized. To buy GKP it would need to issue 135m shares or 7% of the authorized but not yet issued shares. The dilution to Chevron’s existing shares would also be 7%. In 2011 so far Chevron has pumped 2.7m barrel/day so, again, Shaikan ALONE could boost its production by just under 20%. Conclusion All these Super majors could buy GKP by issuing only a tiny proportion of the shares each has available for issue. In return for the dilution to existing shares each would gain a disproportionately large increase in production and reserves, even at a GKP share price of £10. With the Kurdish delegation to Baghdad coming away with some sort of agreed deal based on the draft 2007 O&G law, it is going to be difficult for Baghdad to maintain its policy of blacklisting any Super Major who now goes into Kurdistan. TPO =============================

Gulf Keystone Updates on Shaikan block

Posted on 21 November 2011.

Gulf Keystone provided an update on Monday on its ongoing exploration and appraisal programme for the Shaikan block in the Kurdistan Region of Iraq.

Shaikan is a major discovery with independently audited gross oil-in-place volumes of between 8 billion barrels to 13.4 billion barrels calculated on the P90 to P10 basis with a mean value of 10.5 billion barrels.

Shaikan-2 Well Test Update

The Company has completed the testing programme for the Shaikan-2 appraisal well, drilled nine km to the south-east of the Shaikan-1 discovery well.

Following a new Triassic discovery in the Kurre Chine C zone announced in August, the Company has conducted nine well tests in all target formations in the Triassic and Jurassic, with the maximum aggregate flow rate of 18,900 barrels of oil per day (“bopd”).

Preliminary results of the Shaikan-2 testing programme formed part of the new data used by Dynamic Global Advisors (DGA), independent Houston-based exploration consultants, to calculate the most recent significant upgrade of the gross oil-in-place volumes for the Shaikan discovery announced in November.

Following the conclusion of the Shaikan-2 testing programme, the well will be completed as a producer and tied to an additional Extended Well Test (“EWT”) facility which the Company plans to build and install in 2012.

The Shaikan-2 WDI 842 rig is currently moving to the location of the Shaikan-6 appraisal well, nine km to the east of the Shaikan-2 appraisal well, which is due to spud later in 2011 and will drill to an estimated total depth of 3,800 meters subject to technical conditions.

Gulf Keystone is the Operator of the Shaikan block with a working interest of 75 per cent and is partnered with Kalegran Ltd. (a 100 per cent subsidiary of MOL Hungarian Oil and Gas Plc.) and Texas Keystone Inc., which have working interests of 20 per cent and 5 per cent respectively.

John Gerstenlauer (pictured), Gulf Keystone’s Chief Operating Officer commented:

“Following these successful well tests at Shaikan-2 and in anticipation of equally positive results from the Shaikan-4 appraisal well, we plan to design and build an additional testing and production facility for Shaikan-2 capable of producing a minimum of 20,000 bopd. The completion of the ongoing upgrade of the existing Shaikan-1 & 3 EWT facilities will lead to an initial production of 20,000 bopd of Shaikan crude to export specifications by mid-2012. The Shaikan-2 facility will increase this production target to 40,000 bopd by the end of 2012. With Shaikan being one of the three major producing oil fields in the Kurdistan Region of Iraq today, we look forward to making a significant contribution to the mid-term regional production and export targets recently announced by the Kurdistan Regional Government.“

(Source: Gulf Keystone)

==================

A lesson from the past.	suka47	14
	Jesse Livermore, Wikipedia "Jesse’s fortune would have amounted to anything between 1 and 1.3 billion dollars in today’s money - a remarkable feat for a self-made stock and commodities trader who traded with his own money, not other people's" This was on Max Pet. BB. To quote Jesse Livermore: “And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine – that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money.” Once again the message is you make far more money when you pick a stock and then HOLD. Exxon and Iraq Slimbo1979 1 I've just started reading Daniel Yergin's new book - The quest - energy security and the remaking of the modern world - and two paragraphs stand out: During the years that Raymond led the company (became CEO in 1993) exxon's investment process became known for it's highly disciplined and long term focus. Indeed, exxon's discipline became a benchmark against which the rest of the industry was measured Gulf war - 2003 - neither the Americans nor the british were pursuing a mercantilist ambition yo control Iraqi oil. The issue was not who owned the oil at the wellhead but whether it was available on the world market It also talks about the terrible state of iraq's oil industry infrastructure, stating that help from the supermajors is absolutely essential for them to be able to fulfil their potential. All the above is positive for GKP in my view, be it other majors following exxon or the pressure the US will put on the Iraqis to sort the OGL in order to get the oil flowing Daniel's earlier book, the prize, is essential reading for anyone interested in the oil industry.

Iraq: KRG-ExxonMobil oil contract frozen (30 credits)

Posted on: Thu, Nov 24, 2011

The oil exploration contract that was signed last month by the Kurdistan Regional Government (KRG) and ExxonMobil is said to have been frozen for the time being. The following 415-word report sheds light on the subject and tells what about the developments that led to suspend the contract and under what conditions and considerations. It also tells what about the efforts President Jalal Talabani made to contain the situation.

==============

Subject	Re: From Viiva87, Full message View parent message
Votes for this Posting	Voted 22 times.
Message
Dear friends and investors, Exxon, Exxon, Exxon... One of the most common things I hear now days in this region and read from this BB! You should not underestimate their entry. The talk of Exxon possibly withdrawing is nothing but nonsense and you should waste no time or effort reading such silly thoughts. Exxon have signed. I remember their visits to the region months ago. They are serious about their investment in the region and I believe it’s only a matter of time before the region becomes a playground for consolidations as Minister Hawrami rightfully said so recently. Do you honestly believe a corporation as large as Exxon did not consider Baghdad possibly revoking their contract in West Qurna in case they came to the Kurdistan Region? Of course they did. From what I know, they know very well that they will do better in the region than in Baghdad for many factors; their relationship with the KRG, ease of entry to the region re visas, operational support from the government, access to Europe, Nabbuco etc. Moreover I sincerely do not believe Baghdad has the ability to just shut Exxon out, politically and financially. Exxon are delivering Baghdad around 13% of their oil-based budget! From what I understand it would take roughly 12 to 18 months to move operations over... Would Exxon be legally obliged to continue delivering their contributions if their contract is revoked? I’m not sure actually. It’s a difficult one and I don’t think Baghdad would be prepared to seek the answer considering the political setbacks Maliki and his inner circle are facing with the Iraqi people. They are losing ground and will lose the next elections. Two hours of electricity throughout Iraq and a shortage of clean water, jobs, healthcare, housing, and many other essential public services is clearly not playing in Baghdad’s favour. The Kurds are not happy with the performance in Baghdad and share an impact. Blacklisting Exxon would be sending a very negative message to the international business community and if I were Baghdad I would think twice... In no doubt, though, the news is very sensitive to the KRG relations with Baghdad but it has been decided to press on with our efforts to transform this region into the centre of the Middle East. Make absolute no mistake about this, ladies and gentlemen; you are witnessing the very beginning of a powerful region in the heart of the Middle East. A region bound to move forward and deliver a bright future of our people irrespective of what Sharastani or those backing him say. You will have seen that the KRG pays absolutely no attention to what he or those around him have to say. The dog barks but the caravan continues on... The fact that Maliki continues to support Sharastani politically is further damaging his relations with the Kurds and even other components in the political spectrum, including many Shias. Despite the Kurds putting Maliki in office again along with his right-hand man Sharastani, and despite further meaningless assurances from him and his inner circle, the Kurds are still waiting delivery. We have not seen a single point from Kurdish demands implemented. It's an absolute disgrace to the Kurds that until today, no single Kurd accompany official visits from Baghdad. Yes, Hoshyar Zebari, the Iraqi Foreign Minister, is Kurdish, but he is there to represent Iraq and not the Kurdistan Region. As always, I have to be a little cryptic for obvious reasons. December. December is the key. Keep an eye on it. Is it positive? Well I believe so, either way actually it's positive for investors. One million barrels from this region? It's an absolute shocker what this region can do within a few years with that kind of revenue. The progress this region will make within a decade will be monumental. Now I know for many here they are mere investors in GKP and want to see a good, solid return on their investments. I say to them just exercise a little more patience. End of this year and you shall be pleasantly surprised. Exxon was just the beginning. I must go. Keep in touch. Best wishes, viiva87 PS. This can be copied to the mainboard. ===================

Updated 24.11.2011 10:23:32 UTC The US State Department has said that it warned Exxon, and all major US oil companies with whom it has had contacts, that there were significant risks to signing deals with the regional administration before Iraq passes a national oil law. State Department spokeswoman Victoria Nuland said they have warned US companies that there were significant political and legal risks to acting otherwise. Iraqi Oil Ministry said international oil companies could only sign agreements with the central administration, and other agreements without the implementation of a national oil law are illegal. A top Iraqi official said on Tuesday that Baghdad may impose sanctions on Exxon before the end of the year because of its deal with the regional administration in the north of Iraq.

=====================

Bombs in Iraq market kill 10, wound dozens

24 Nov 2011 17:52

Source: Reuters // Reuters

(Updates toll, adds details, quotes)

BASRA, Iraq, Nov 24 (Reuters) - Three bombs exploded in a market in Iraq's southern oil city of Basra on Thursday, killing at least ten people and wounding dozens, security sources said.

Basra, 420 km (240 miles) southeast of Baghdad, is the largest city in the mainly Shi'ite south and the heart of Iraq's oil industry. It hosts a major conference for international oil executives and industry officials starting on Friday.

Two bombs hidden in a three-wheeled motorbike exploded in quick succession at the market in northern Basra, and a third bomb went off a short time later as people gathered at the scene, two police sources said.

Noufal Hassan, the owner of a mobile phone shop near the scene, said he heard two explosions at the "Thieves Market".

"I immediately went out of my shop and saw the blood ... limbs, hands and legs, bodies spread on the streets," he said. "The nearest shops were shattered and the cars were burned."

The blasts underscored Iraq's tenuous security situation as the remaining 18,000 U.S. troops leave by year-end, nearly nine years after the invasion that toppled Saddam Hussein.

Iraqi officials have said militants may step up attacks as U.S. troops withdraw.

Iraq is still plagued by a lethal Sunni Muslim insurgency and Shi'ite Muslim militias that carry out scores of bombings and other attacks each month.

Basra's four-day oil conference is expected to host senior government oil officials and executives from international companies such as Exxon Mobil and Royal Dutch Shell .

Hospital sources put the Basra bomb toll at ten dead and about 55 wounded, while a police source said 12 people were killed and 42 wounded.

Most of the victims were police and soldiers, including several senior leaders, said Ali al-Maliki, head of the Basra provincial council security committee.

"The fingerprints of Baathists and al Qaeda are clear in these explosions," he said.

Iraqi government officials frequently accuse former members of Saddam Hussein's banned Baath Party of trying to destabilise Prime Minister Nuri al-Maliki's fragile coalition government.

The government recently rounded up more than 600 former military leaders and Baathists, accusing them of plotting to seize power when U.S. troops leave.

In the city of Ramadi, in western Anbar province, a bomb exploded in a crowded market, wounding five people, police said.

(Reporting by Aref Mohammed; Writing by Jim Loney; Editing by Louise Ireland)

=================

UPDATE 1-Iraq demands Exxon explain Kurdish oil deal

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Sun Nov 27, 2011 10:40am EST

* Iraq warns of sanctions on Exxon over KRG deal

* So far no response from U.S. oil group

* Dispute underscores Baghdad-Arbil tensions

By Ahmed Rasheed

BAGHDAD, Nov 27 (Reuters) - Iraq will send Exxon Mobil Corp a further letter demanding an explanation of its contract with the semi-autonomous Kurdistan region after receiving no response from the U.S. oil group, Iraq's oil minister said on Sunday.

Exxon in October signed a deal with the Kurdistan Regional Government to develop six exploration blocks. But Iraq's central government considers oil deals signed with the semi-autonomous region illegal and has warned it could introduce sanction against Exxon.

"So far we have sent Exxon three letters and tomorrow we will send them another confirmation letter seeking their response," Oil Minister Abdul-Kareem Luaibi said. "We have not decided anything yet. We are waiting for their response."

Baghdad and Kurdistan's capital, Arbil, are caught in a long dispute over oil and territorial rights. The central government says it should have control over the oil sector, but Kurdistan claims it has the right to manage its oilfields.

The Exxon case is highlighting tensions between Baghdad's Arab-dominated central government and Kurdistan over disputed Iraqi territories, a potential flashpoint for trouble as the last U.S. troops withdraw by the end of the year.

The outcome of the Exxon move is likely to influence how other companies carry out oil investment in OPEC-member Iraq, but it could also pressure Prime Minister Nuri al-Maliki as he faces demands from other regions for more autonomy.

Deputy Prime Minister for Energy Hussain al-Shahristani, architect of recent Iraqi oil deals and a hardliner against Kurdish energy autonomy, said on Tuesday the government was considering sanctions against Exxon by year end.

Iraqi officials have said the Kurdistan deal could jeopardize Exxon's huge West Qurna One oilfield in the south. The U.S. explorer is also leading a multi-billion-dollar water injection project seen as key to southern oilfield production.

At the heart of the dispute between the regions is control of vast oil resources and territories along their internal frontier. An oil law aimed at resolving the feud has been delayed after political parties initially approved it in 2007.

====================

Heritage Oil finds 'major gas field' in Iraq

Investors had been expecting Heritage to find oil

British exploration firm Heritage Oil has announced the discovery of what it is calling a "major gas discovery" in the Kurdistan region of Iraq.

Heritage said it estimated the field could have up to 12.3 trillion cubic feet of gas, with a flow rate of 75m cubic feet per day when the field is operational.

However, shares in the company fell 75.9p, or 17%, to 360.7p on the news.

Investors had been expecting Heritage to find oil in the Miran West field.

The infrastructure for getting gas to its ultimate markets is not as highly developed in the region as the infrastructure for oil.

"The discovery of a major gas field with exceptional flow rates makes this one of the largest gas fields to be discovered in Iraq," said Heritage chief executive Tony Buckingham.

One potential option for the company is to route gas from the field to wealthy European markets via the planned Nabucco pipeline, although the pipeline itself is not due to be operational before 2015.

===============

03:12	Re: Kashagan	investor48	12
	Hi PaulRes, If i am not mistaken this is a JV between ExxonMobil and Shell and billions USD have been spent and yet not a single barrel of oil has been produced!! This makes Shaikan,a field that Majors would love to get their hands on!!To ramp Shaikan's production to 400K barrels per day will not costs a fraction of Kashagan!The derampers will tell us that the markets will melt down,oil will not be required anymore,the form of transport is by horses and donkey and bicycles.We will not be flying,and that Iran will launch a nuclear war directed at our Shaikan field!!!! In the final analysis,the world still needs cheap sources of Hydocarbons and Kurdistan is one of the last frontier!Shaikan is a massive oil field,cheap to produce and whichever Major or NOC that gets hold of it can produce extremely competitive oil for many years to come!! Best wishes More View thread 2 Respond Login to Vote up New enhanced Spread Betting platform. Find out more.
02:23	Kashagan	PaulRes	2
	Kind of puts Shaiken & our other blocks into perspective when the majors having found all this oil in Kazakhstan, are still contemplating if its economically viable putting phase two into action. Makes Shaiken look a no-brainer. http://fuelfix.com/blog/2011/11/17/biggest-oil-find-in-decades-becomes-39-billion-caution/ Kashagan Field is an offshore oil field located in Kazakhstan.[1] The field is situated in the northern part of the Caspian Sea close to the Kazakhstan city of Atyrau. The field was discovered in 2000 and was one of the larger discoveries in that decade, it is estimated that the Kashagan Field has commercial reserves from 9 billion barrels (1.4×109 m3) to 16 billion barrels (2.5×109 m3) of oil. The field is offshore in a harsh environment, where sea ice is present in the winter and temperatures from -35 °C (-31 °F) to 40 °C (104 °F) can be encountered. Commercial production is expected to start by the end of 2012, according to Kairgeldy Kabyldin, the chief executive of Kazakhstan's state oil and gas company KazMunaiGas.[2] It has been designated as the main source of supply for the Kazakhstan-China oil pipeline.[3] Kashagan is considered the world's largest discovery in the last 30 years, combined with the Tengiz Field.[4]

‘Washington behind Baghdad on oil issue’
http://warandpeaceinthemiddleeast.com/2011/12/washington-behind-baghdad-on-oil-issue/
December 03, 2011

Washington supports Baghdad’s position regarding Exxon Mobil Corp.’s oil contracts with Kurdistan Region a Representative from the Kurdish Blocs Coalition in the Iraqi Council of Representatives said Wednesday. He added pressures on the company will make it respond to Baghdad eventually.

Mahmoud Othman told AKnews the measures the Iraqi government has taken towards Exxon are political and not economic. He said Baghdad believes this company is important, and must choose whether to work with Kurdistan region or Baghdad.

“The U.S. position is bad towards Kurdistan…Preventing Exxon Mobil Corp. from operating in the region will make losses for Iraqis in general, including the people of Kurdistan, because the revenues of the extracted oil from Kurdistan goes to the treasury of the federal government.”

In an article last week Javier Blas, commodities correspondent for the Financial Times, said Exxon’s move north into Kurdistan flew in the face of conventional wisdom that “the U.S. interests of ‘Big Oil’ and Washington go hand-in-hand”. The U.S. state department were caught unawares by the corporation’s northern adventure that was taken it would seem contrary to strong advise from the U.S. government.

================

Japanese Loan Is An Encouraging Step Forward For Downstream Development
http://www.oilandgasinsight.com/file/107141/japanese-loan--is-an-encouraging-step-forward-for-downstream-development.html

Industry
BMI View: A Japanese loan to Iraq's Basra and Baiji refineries will go a long way to modernise the country's struggling downstream sector. However, ultimately, if the government wants...


BMI View: A Japanese loan to Iraq's Basra and Baiji refineries will go a long way to modernise the country's struggling downstream sector. However, ultimately, if the government wants to attract IOCs to the sector, it will have to offer more substantial tax breaks and discounts.
On November 22, Japanese Prime Minister Yoshihiko Noda, speaking during Iraqi Prime Minister Nouri Al-Maliki's working visit to Japan, said that his country would provide a JPY67bn (US$871mn) loan to Iraq's oil, communications and health sectors. The loan includes JPY42.4bn (US$551mn) for the upgrade of the Basra refinery and JPY2.7bn to upgrade engineering services and introduce modern processes at the Baiji refinery.
Iraqi Road Ahead
iRaq'n'Roll Music
Click here to see full size Table

BMI estimates that Iraqi refined product imports will hit 266,000 barrels per day (b/d) in 2011, 15 times more than in 2000, but troubles still plague the sector. Although the country has the resources to achieve complete energy independence, years of war and UN sanctions have hampered the development of downstream infrastructure. Furthermore, civil unrest and sabotage, such as the February 2011 attack on the Baiji refinery, the country's largest, have forced many facilities to reduce output or cease production altogether.
Demand for refined products looks set to rise rapidly in the coming years, from 720,000b/d in 2011 to 1,197,000b/d in 2021, meaning boosting domestic refining capacity is a priority.
In a bid to encourage new downstream investment, the 2007 'Law of Private Investment in Crude Oil Refining' enables the oil ministry to supply feedstock crude at a 1% discount to the export price, less the cost of transporting crude from the refinery's 'nearest delivery point'. In February 2011, the deputy prime minister for energy, Hussein al-Sharistani, expressed an interest in seeing Brazil's Petrobras invest in the country, even publicly offering to sweeten the investment terms. In May, the deputy oil minister, Ahmed Al-Shamma, said that Italy's Eni had expressed interest in building a refinery in Karbala. However, these investments have failed to materialise and so far no international oil company (IOC) has agreed to invest in the downstream sector.
Gaining Momentum
Glimmers of hope first appeared on July 24 2011, when the deputy oil minister told Dow Jones that the country had signed a preliminary agreement with Italy's Saipem, a large unnamed financial institution, and former executives of Eni for the construction of a 200,000b/d refinery in Karbala. The facility, estimated to cost US$6.5bn, is expected to come onstream within four years, with construction to start in Q112.

Between Iraq And A Hard Place
Planned Iraqi Refineries
http://www.oilandgasinsight.com/file/table/2/107141/japanese-loan--is-an-encouraging-step-forward-for-downstream-development.html
Source: BMI

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The deramper already knows the answer; the deramper already knows what will be found. The power of this tactic is that the deramper is now in control of the actions of the shareholders; the deramper has you, the shareholder doing HIS/HER due diligence and when you, the shareholder come back to the group with a questionable finding then the deramper gains credibility. What to do??? Solution??? Well, I think it's important to find answers but on your own terms. I actually pick up the phone and call the company and talk to the investor relations person or the CEO until I get a satisfactory answer. The problem here is that the advanced deramper has you doing his bidding and his work; you have essentially joined his ranks. So, develop your own little Due Diligence package and answer questions by placing the information into the package and referring all new investors to read the answers to questions raised in the Investor InformatiDe-Rampers Handbook.
.
IT IS EASIER TO SCARE PEOPLE INTO SELLING THAN IT IS TO INFORM PEOPLE INTO BUYING A SHARE.
Know the enemy who wishes to steal your money!

.
Lesson 1: Remember, DERAMPERS NEVER DERAMP A BAD SHARE. Watch the board for shares with no potential. They never have any derampers. Derampers only go after shares that are going upwards or have excellent potential to go up. Derampers get left behind, so they want to bring the price down to be able to get in at a great price.

Lesson 2: DERAMPERS ALWAYS BRING UP OLD NEWS THAT YOU HAVE HEARD MANY TIMES. New startup companies always have a few bits of bad news. The deramper will post this over and over again. The stupid deramper will try to make the old news a bit fresher to try to fool you.

Lesson 3: DERAMPERS POST MANY TIMES A DAY. They try to wear you out. They comment on everything, every other post, and can answer every question. THEY KNOW IT ALL! There is no positive comment they won't deramp. They try to control the board. True longs may have to address the derampers or they will appear to the newbies as being the people with all the information.

Lesson 4: DERAMPERS WILL LIE TO YOUR FACE. Never trust a deramper. The truth on startup companies is that many mistakes are made and losses happen. The deramper will try to make you believe all startup companies make a profit, release financials every quarter and all aspects of the business run smoothly. THIS IS NOT TRUE. THE DERAMPERS LIE TO YOU. Startup companies can go years without profits, financials and good business, this is the nature of the beast.

Lesson 5: The derampers know YOU CAN'T VERIFY THEIR STATEMENTS. That's why they make the statements they do.

Lesson 6: The derampers PLAY ON YOUR LACK OF KNOWLEDGE. They can lie about information and you couldn't know the difference (unless you have done your assessment of the company and know the truth and facts).

Lesson 7: Derampers play on your lack of patience. YOU have held a share for a while. You knew it will be a big share someday, but the DERAMPER CAN GET TO YOU BECAUSE YOU ARE TIRED OF WAITING FOR YOUR GAIN. That's when the deramper is best. You are tired. You have forgotten the goal for the share was to hold it for one year. The deramper is bothersome, so you dump it on a bad day. Some others also dump. Then you get mad for your loss and return to let everyone know how mad you are. Then you turn into a deramper as well. THE DERAMPER HAS WON, AND GAINED A NEW PARTNER, TOO.

Lesson 8: BRING THE PRICE DOWN. That is the deramper's job. The truth is not important. Lies are the norm. Post continuously on the board every day. They are trying to hit the newbies visiting the board. They are trying to wear out the longs on the board. They do whatever it takes to wear the longs out.

Lesson 9: DERAMPERS WILL TRY TO GREAT DOUBT AND GET YOU TO RESEARCH ITEMS THAT THEY KNOW WILL LEAD TO THE CREATION OF DOUBT IN YOU AND IN OTHER SHAREHOLDERS. A typical trick of an advanced deramper is to propose that there is a potential "problem" because "we" don't have the facts on a particular subject. The deramper dares someone in the on package but DON'T GET INTO A CONVERSATION WITH THE DERAMPER REGARDING THE TOPIC. THAT IS WHERE YOU LOSE. DON'T CONVERSE WITH THE DERAMPER; ANSWER INDIRECTLY; DON'T USE THE DERAMPERS NAME; DON'T GET INTO A PERSONALITY CONTEST.

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Re: Basra Oil conference 'stymied'	SpankiMonkey	8
	http://www.iraqoilreport.com/security/energy-sector/security-problems-stymie-basra-conference-6784/ Security problems stymie Basra conference An exhibition booth belonging to the Italian company Eni stands empty at the second annual oil and gas conference in Basra. Many international oil companies and key ministry officials stayed away amidst security concerns. (ALI ABU IRAQ/Iraq Oil Report) By STAFF of Iraq Oil Report Published November 29, 2011 Two key elements were missing from a second annual oil and gas conference and exhibition in Basra over the weekend: the major foreign oil companies and the Iraqi Oil Ministry. Their absence was in many ways symbolic of Iraq's oil sector today. The opportunity to do business is real – the conference was by no means empty, with hundreds of Iraqis and foreigners attending the symposium and lining the expo hall – but security, while improved, remains the biggest impediment, and likewise makes... Absence of major foreign oil companies due to security risks. Now do you see why Exxon et al would rather operate in the safer environment of Kurdistan Mr S !? Oh, that and the considerably better terms on offer ! Notice in the picture ENI didn't turn up. Weren't they one of the companies rumoured to be interested in GKP !? ------------------------ Curiouser and Curiouser !!! My gut (and only my gut, no rumour here) is that the US is more interested in allying itself to the North.... the contracts for Oilers are more favourable there and the Government more flexible to US Governmental requests.... The KRG could and would like the US as an ally, their desire for autonomy needs a strong ally and theres none stronger, finally, I find it hard to believe that after the $800 billion the US have spent in the two Iraq wars, all the lives lost etc etc, that they are not looking for some sort of payback.... where is this likely to come from best... ICG or KRG ? Pure speculation and no recomendation to buy GKP (guess for yourselves) Cheers

FACTBOX-Key political risks to watch in Iraq

03 Dec 2011 12:40

Source: Reuters // Reuters

By Jim Loney

BAGHDAD, Dec 3 (Reuters) - The U.S. troop withdrawal, recent bombings by militants and an arrest campaign against former members of Saddam Hussein's banned Baath Party have sharpened tensions in Iraq.

A decision by Exxon Mobil to venture into semi-autonomous northern Kurdistan set up a confrontation between the world's largest publicly traded oil company and the central government, which threatened to cancel Exxon's southern oilfield deal.

The Exxon exploration pact could push ongoing disputes between Baghdad and the Kurds to new heights just as the remaining 12,000 American troops leave Iraq, increasing anxiety in the disputed territories, already a potential faultline for future conflict when the buffer of U.S. forces is gone.

U.S. President Barack Obama's announcement on Oct. 21 that the remaining U.S. troops would be home for the holidays kicked into high gear a withdrawal that dawdled(

To take more time than necessary: dawdled through breakfast.)

as Washington and Baghdad talked about keeping several thousand in Iraq past the Dec. 31 deadline.

The two sides were unable to agree on legal safeguards for U.S. forces if they stayed. The prospect appeared unpalatable to Iraq's fractious political blocs, uncertain of what the public response would be and pressured by a threat from powerful anti-American cleric Moqtada al-Sadr to revive his militia if they stayed.

While violence has fallen since the worst days of sectarian conflict in 2006-2007, bombings, assassinations and other attacks by Sunni Islamist insurgents and Shi'ite militias still occur daily and scores of people are killed every month.

U.S. disengagement could worsen sectarian differences and meddling by neighbours, including Shi'ite Iran and Sunni Saudi Arabia.

By the end of December -- nearly nine years after the U.S.-led invasion that toppled Sunni dictator Saddam Hussein -- only a small contingent of civilian trainers and fewer than 200 U.S. military personnel attached to the U.S. embassy will remain.

Multibillion-dollar deals Baghdad signed with energy majors that could quadruple oil output capacity in six years and power Iraq into oil's big league are moving ahead only slowly.

Increased production would give Iraq the money it needs to rebuild, but everything depends on whether the OPEC member can secure oilfields, refineries and other vital infrastructure.

Iraq is isolated from world markets. Only a few dozen firms are listed on the stock exchange. Iraq's dinar is thinly traded and the exchange rate is effectively determined by the central bank in its dollar auctions.

Below are some of the major risks facing Iraq.

THE U.S. PULLOUT

U.S. troops are headed for the exits. A steady stream of troops and equipment has choked the southern route to Kuwait in recent weeks.

Troops have handed over most of their major bases, including the Victory headquarters complex in Baghdad, and consolidated operations on a handful of bases which are being steadily handed back to the Iraqi government.

Prime Minister Nuri al-Maliki has said his army and police can handle internal security. But military commanders and some Iraqi soldiers say U.S. troops are still needed next year to train weak air and naval defences.

Baghdad has signed a deal to buy 18 F-16 warplanes in a move that will further strengthen military ties, but the jets will not be delivered for years.

Baghdad and Washington have yet to negotiate any new defence agreement but analysts say it is likely the U.S. military will step in to protect Iraq's vulnerable airspace from incursions.

Keeping U.S. forces in Iraq had risked upsetting anti-American Shi'ite Moqtada al-Sadr, whose militia fought U.S. and Iraqi troops after the 2003 invasion. Sadr's political movement overcame its antipathy towards Maliki to become a kingmaker for the prime minister last year.

Sadrist protesters flexed their muscles this week in Baghdad, Basra and elsewhere as U.S. Vice President Joe Biden visited Iraq to mark the start of a new diplomatic relationship.

WHAT TO WATCH:

- Protests by Sadr supporters over U.S. presence.

- A new security agreement between Baghdad and Washington.

KURDISH-ARAB CONFLICT

Tension between Arabs and minority Kurds, who have enjoyed virtual autonomy in their northern enclave for 20 years, is festering. U.S. military officials have long considered the northern disputed territories a potential flashpoint for conflict after U.S. troops withdraw.

Kurds hope to reclaim areas they deem historically Kurdish and their peshmerga troops briefly surrounded the disputed city of Kirkuk in February in a show of force.

While Kurdish leaders celebrated the announcement last month of a new contract for six exploration blocks with Exxon Mobil, the first major to move into the region, Baghdad fumed.

The central government claims rights over Iraq's world-class oil reserves and deems contracts with the Kurdish government illegal. It threatened to void Exxon's contract to develop the rich West Qurna Phase One oilfield in the south.

The oil ministry has demanded an explanation from Exxon, which is also the lead developer on a key, multi-company water injection project meant to boost production in southern fields.

Baghdad and Arbil have been at odds for years over control of Kurdish oil.

The Exxon deal came in the midst of some small signs of progress, including an agreement between Maliki and Kurdish Prime Minister Barham Salih to present a new oil law, possibly a modified version of a 2007 draft agreed by all the political blocs, to parliament by year-end.

The Kurds are key allies of Maliki in his frail coalition government. Some officials have suggested that Kurdish support for the premier could be at stake in the oil law talks.

WHAT TO WATCH:

-- Clashes between Kurdish peshmerga and Iraqi troops

-- Passage of oil legislation, or a protracted fight.

A SURGE IN VIOLENCE

U.S. and Iraqi military leaders predicted a possible surge of attacks as American troops withdraw and militants try to undermine the government.

Despite improvements, Iraq remains vulnerable to Sunni insurgents and Shi'ite militias, which launch scores of bombings and other attacks every month. According to government figures, 161 civilians died in violence in October, the highest toll of the year, along with 97 police and soldiers.

Political feuds, Sunni discontent or an attack on a holy site could rekindle violence. Armed groups are expected to increase assaults towards year-end as a way to show they are pressuring U.S. troops.

Attacks on oil facilities could push up global oil prices since Iraq has the world's 4th largest reserves. Recent attacks on southern oil facilities showed even areas considered safer can still be vulnerable.

WHAT TO WATCH:

-- Attacks on oil facilities or foreign oil workers

-- A major attack in Baghdad testing local forces

-- A new spike in attacks on departing U.S. troops (Editing by Patrick Markey)

======================

Author	bonobo77 View Profile Add to favourites Ignore
Date posted	today 08:22
Subject	Exxon Kurdistan (NYSE: EXK)
Votes for this Posting	Voted 95 times.
Message
A common question among bulls and bears alike regarding GKP concerns the ever-widening value gap between our assets and our SP. We keep hearing: ‘If GKP is worth £8-£20 a share, how come it’s trading at 130/140/150/160/170p etc.?’ I think that those who are asking that question are approaching the value gap in the wrong way. Certainly, there are many factors that may contribute discount to us: - Geopolitics (inc. lack of o&g law) - Excalibur Case - Perceived lack of corporate governance - Poor Macro-economic environment - Lack of decent production - Absence of exports - No significant revenue generation - Likely CAPEX requirements should we go it alone - Lack of production experience - AIM listing But I ask you to look at the above in a different way. Imagine Exxon (could just as easily be Chevron) was to set up a wholly owned subsidiary E&P company called ‘Exxon Kurdistan’ (EXK). This subsidiary company was commandeered by the very same BOD that run the mother company, with Rex Tillerson at the helm. EXK is also listed on a main stock exchange and has exactly the same number of shares in issue as GKP. Now, imagine EXK discovers 14.4bn barrels of P50 onshore oil - and rising - in its first two years of prospecting ... with much more likely to come from its more undeveloped assets like Ber Bahr. What Market Capitalisation do you think the company would have? And would the market apply the same savage discount to those billions of barrels, using the same sticks that it uses to beat GKP with in list above? Geopolitics? Exxon Kurdistan’s mother company is an extension of the US State Dept. It is capitalised higher than many countries. You still think the politics would result in a savage discount? or do you think EXK's sphere of influence would ensure its interests were protected (and monetised). Excalibur Case? Do we think Rex Wempen would be so cavalier as to attempt to take on Exxon’s lawyers? And even if he were so foolish, do you think he would walk away with even 30% of 5% of Exxon Kurdistan? This company has successful litigated against governments. Lack of Corporate Governance? Not an issue with Rex Tillerson and BOD at the helm. Poor Macro-Economic environment? Possibly. But I suspect that Exxon Kurdistan would fare no worse than its parent company Exxon Mobil … and EXK would also have the security of that company’s almighty financial firepower to see it through any turbulence. Might even be seen as a safe haven. Lack of production? I doubt that would be an issue for Exxon Kurdistan as, in line with company’s historic record, the filed development would be underway in an eyeblink. With pipelines also likely to be fast-tracked by this more robust and proven entity, the export question would be more likely to be quickly resolved. No significant revenue generation? Again, not a problem as EXK is backed by the huge wealth of its parent company. Similarly, the CAPEX requirements would be easily met. And the last two discount factors would not apply – Lack of production experience / AIM listing. So … when people ask: ‘If GKP is worth £8-£20 a share, how come it’s trading so low?’ … they are asking the wrong question, because it is one that can be so easily met with a list of possible ‘risks’ and ‘discounts’. The question we should actually be asking is: ‘How much are GKP’s 14.4bn barrels of P50 worth to Exxon/Chevron etc.?’ Because, under their stewardship, most of the risk factors currently priced in to our SP simply evaporate, leaving scope for a huge rerating and a rapid closing of the value gap. One RNS would do it overnight. Some have called this possibility ‘Shock and Awe’. But in the event that e.g. Exxon tabled a £10 per share offer, and knowing that the risks are obliterated in one stroke, it doesn’t seem so shocking, does it? In fact, it seems perfectly reasonable. ===================

Analysis: What was Exxon thinking?

Hussain al-Shahristani (right), then oil minister and now the deputy prime minister for energy, sits with ExxonMobil executives at the signing ceremony for the West Qurna 1 project. (STAFF/Iraq Oil Report)

By BEN VAN HEUVELEN of Iraq Oil Report
Published December 5, 2011

ExxonMobil's controversial signing of six exploration blocks with Iraq's semi-autonomous Kurdistan region has jolted the country's oil sector out of its uneasy status quo.

In political arenas where Bush administration benchmarks and the massive U.S. Embassy failed to force headway, another American icon – the world's most profitable company – has caused Iraqi decision makers to start confronting fundamental questions about the shape of not only the oil sector but also the state.

================

Mon 18:09	Derisking	Hub	60
	A fair few investors have suggested that volume would be much higher if a sizable takeover was in the wings. Conclusion - must be poppycock, But if you use some good old fashioned common sense - then you'll see how the picture can develop and derisk itself. Here's a little guide (albeit speculation) 1. Sp currently 178p 2. Lets assume it rises to test 200p as we head towards Dec 12th or end of the year in anticipation of O&G law draft/agreement (subject to parliament ratification). 3. Goldman Sachs have a target nearer 380p I believe based on O&G passed. Fox Davies are near 310p I believe. So - when the draft law finally gets agreed (if) lets assume the sp zips up to 350p range. 4. At this juncture, parliament is still some 6 to 8 weeks away from giving it their seal of approval. So lets assume the sp moves nearer 400p by the time we get to Feb 2012. 5. Believe it or not, there are many investors and II's out there that prefer the 'safer' 2 or 3 bagger return than the much 'riskier' 5 to 6 bagger return. So lets assume that those that were sidelined for so long awaiting the O&G ratification - pile in big time with a view of a £10 or £12 takeover approach. By waiting for the O&G they might miss out on £2 per share, but they still stand a good chance of making 300% 'derisked' if takeover valuations are to be believed. And believe me - there are plenty of fund managers that are out there that like those kind of returns. 6. In the background we have the 'takeover' rumours. And between me finishing this post and the next morning - a takeover offer could be tabled. It could come at anytime. But lets assume it comes after the O&G law is agreed circa end of Dec 2011. Will there be a chance of gaining more upside after the news is announced - a counter offer or bidding war perhaps? Hence - it's easy to see how GKP can move from 178p to 400p and 400p to 600p and 600p to 900p etc etc. Ironically (and this is my view only) the currently sp level is smallfry. The question is - can the II's and those sidelined get in after the O&G at just above this price and derisk or will it be racing away from them well before then? There's only 3 weeks left in trading till year end. Not long. I think we are heading towards that little bottle neck where the noises are no longer muffled but are becoming clearer. Almost clear enough for those risk adversed sideliners to make the leap on board. But like anything in iraq - it's unpredictable, so I guess I'm saying - don't underestimate how much GKP's sp can leap once an O&G law is finally passed. The rest should take care of it self. HUB

Exxon silent on controversial Iraq oil deal

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By Steve Hargreaves @CNNMoney December 6, 2011: 1:30 PM ET

Exxon Mobil CEO Rex Tillerson, seated right at a World Petroleum Congress session Tuesday, declined to answer questions about the company's deal with Iraq's Kurdish region.

NEW YORK (CNNMoney) -- Exxon Mobil Chief Executive Rex Tillerson refused Tuesday to answer questions about a controversial deal the oil company has signed with the Kurdish government in northern Iraq.

Tillerson was asked by an audience member at a World Petroleum Congress panel in Qatar if he thought the contracts the company has signed with the regional government would hold up under Iraqi law.

"I'm not in a position to comment on that," he answered to mumblings(To utter indistinctly by lowering the voice or partially closing the mouth:) and scattered applause among an audience containing a mix of oil industry representatives from Western firms and state-run enterprises, many from the Middle East.

At a press conference after the panel, Tillerson was again asked about the ramifications of the Kurdish contracts, and again declined to answer.

Exxon, (XOM, Fortune 500) which holds big contracts with the Iraqi government to develop oil fields in the southern part of the country, was sharply criticized by Iraqi government ministers last month over the deal. The Iraqis suggested Exxon might be sanctioned over the move, possibly putting their deals in the southern part of the country in jeopardy.

Iraqis in Baghdad are loathe to see oil companies sign separate deals with the semi-autonomous government in the Kurdish north, preferring instead that all deals go though the central government.

But the Iraqi central government has yet to finalize an oil law establishing how the oil royalties will get divvied up, and the Kurds are known to be offering terms that are more generous to foreign oil firms.

A handful of smaller oil companies have signed deals with the Kurds, but so far most major firms have stayed away.

Iraq oil starting to come on strong

Last month, the U.S. State Department said it warned Exxon that any deals it signs with the Kurdish government may be annulled by Baghdad.

Iraq, already the world's 12th-largest oil producer, is thought to hold vast amounts of undiscovered oil. Given proper development and time, some say the country could eventually rival Saudi Arabia in terms of oil output.

But ramping up Iraq's oil production has been hobbled by ongoing violence, a lack of a clear oil law, and investment terms that are quite unfavorable to foreign firms, with effective tax and royalty rates in excess of 90%.

==============

08:13	Reports ...	bonobo77	29
	... from Baghdad suggest that Sharistani has not yet made a decision to remove Exxon from the 4th bidding round. He is supposedly leaving the decision to Maliki and Luaibi. And as we already know, there has been no decision to remove Exxon from W.Qurna. We also know that Barzani has reiterated that Maliki was informed of Exxon's decision to move into Kurdistan. So one might presume that, with his tacit approval, things could move very fast. The silences from Exxon, Maliki and US State Department will likely be broken after Mailiki's Dec 12th visit to see Obama. Rumour has it that Exxon does not want to comment and enter into a political debate, preferring instead for the US State Dept / Obama to reach an agreement with Maliki on a clarified position that negates a blacklist and opens up Kurdistan to US companies. This will clear the way for the remaining 28 KRG contracts to be assigned and for the predicted 'explosion' of M&A activity in the region. If the above is true .... hold firm. Mr. War Criminal Is Coming for a White House Handshake http://www.scoop.co.nz/stories/HL1112/S00037/mr-war-criminal-is-coming-for-a-white-house-handshake.htm Wednesday, 7 December 2011, 11:52 am Article: Navid Dara Mr. War Criminal Is Coming to Washington for a White House Handshake Iraqi Prime Minister Nouri al-Maliki, under investigation by a Spanish court for war crimes against Iranian dissidents in Camp Ashraf, Iraq, is coming to Washington for a hand hake with President Obama at the White House. As his December 5 op-ed piece in the Washington Post show, Maliki is visiting Washington to try to defuse the well-placed fears about Iraq, under his leadership, becoming a proxy state for Iran. And, again judging by his commentary in the Post, he feels behooved to justify, albeit ineffectively, his made-in-Tehran plans to either forcibly relocate Camp Ashraf residents to multiple detention centers in Iraq before extraditing them to Iran, or kill them all at Camp Ashraf if the residents resist the forcible relocation. So, in either case, President Obama may be shaking hands with a war criminal responsible for massacre of the unarmed and defenseless population in Camp Ashraf. That’s not exactly the kind of poster image President Obama may want for his re-election campaign. He must therefore seize the December 12 White House visit to convey in the most unequivocal terms the United States' resolve in seeing the camp residents unharmed. Speaking in a Washington conference about Camp Ashraf situation last November, Professor Alan Dershowitz, an authority in international law and genocide prevention, said in reference to Maliki’s White House visit that "If the President of the United States does not demand a change in the Iraqi government’s commitment to close the camp [by end of 2011], his silence will be taken as acquiescence, and that is so dangerous, silent acquiescence." Dershowitz said: “When the holocaust happened, everybody said we didn’t know. When the Armenian genocide occurred, we didn’t know, when Cambodian genocides were occurring, people were telling us it was propaganda, we didn’t know. Rwanda Darfur, we didn’t know. We know [about Camp Ashraf]. We have been told. We have been warned.” The fact remains that the 3,400 residents of Camp Ashraf were promised protection. Those individuals and the camp’s leadership trusted America’s promise signed by most senior commanders of the US military, and gave up their weapons. With the deadline set by Iraq to close down the camp in just over three weeks and with the official departure of US forces, the question making round in the US Congress and among thousands of Iranian-Americans who s is: Would President Obama uphold America’s promise and ensure safety and security of Camp Ashraf residents? Would President Obama honor the contract America signed with each individual at Camp Ashraf and would not leave them behind unprotected? Would Administration stop paying lip service to the dire humanitarian situation in Camp Ashraf and fulfill its commitments by asking Maliki to extend his December 31 deadline to close down Camp Ashraf so that the UN refugee agency can carry out the process of relocating the residents to third countries in a safe a secure manner? The clock is ticking, and the lives of 3,400 Iranian dissidents, including 1,000 women, are on the line as Camp Ashraf is inching toward Srebrenica-style massacre before the year’s end. ============

Tue 23:44	Re: Shahristani-parliament to approve O&...	SpikeyDT
	zooshare - 6 Dec'11 - 23:13 - 135428 of 135433 http://uk.advfn.com/cmn/fbb/thread.php3?id=21783165&from=135423 This article is significant, reported earlier by Spikey but with wrong link and bad translation. http://www.mustakbal.net/index.php?option=com_content&view=article&id=10532:2011-12-06-08-13-03&catid=2:2011-07-18-15-01-39&Itemid=8 The arabic basically says two things, dated today: 1 shahristani urged Iraq parliament to pass the draft approved by majority of ministers two months ago. [This is the draft that was rejected by KRG. This guy is really something, is he oblivous to the hell the broke loose since..] 2. BUT, the energy committee has rejected his request and decided to continue merging two or three drafts into one THAT PERMITS REGIONS [SUCH AS KURDI] TO APPROVE THEIR OWN OIL AND GAS CONTRACTS.

Last year ws completely different. GKP had only one very deep drill on the go, long periods without news, and Iraqi politics was even more frustrating than it is today.... as the saga of Maliki or Allawi froming a government went on for more than 9 months! But throughout that time the SOL stayed very low, normally around the one million mark and never more than 5 million.

IMO, there was very little need to 'control' the SP by this means as general market sentiment was down on GKP anyway, and the bashers were well on top on this BB as I am sure you recall. As you rightly say, none of the majors were showing any interest in GKP then.

This year the situation has been entirely different, with GKP repeatedly announcing massive OIP uprades, and the SOL has risen dramatically with the first huge rise coming at around the same time that the OIP went up from 4.2 billion (P50) to 7.5 billion (P50) in mid-April. The SP has NOT followed suit.

The chart below illustrates the 2 years perfectly.

http://www.dataexplorers.com/includes/php_proxy.php?Source=SF&Version=1.0&Days=730&Field=Quantity&IdType=ANY&IdValue=GKP&ChartType=Line&ChartStyle=Default&ChartTemplate=TwilightTemp2&Width=600&Height=400&Url=https://api.dxopen.com/DxlApi/Chart.aspx

Furthermore, it has only been in the last few months that we have been talking seriously about BIR's to Shaikan, AB sale, possible sale of GKP as a whole, and re-ratings resulting from the arrival first of Vallares/Genel and then of Exxon in Kurdistan. So, it is very likely that the SOL have been used by 'someone' with a vested interest in keeping the price low... despite the massive pressure on it to rise.

As nlper says, there are more suspects than in an Agatha Christie novel, and my suggestion is simply that we consider who those suspects are likely to be and what they have to lose or to gain... without dismissing anyone!

Oh, just one last question (as Columbo would say).... who do you think stands to benefit most from the SP being kept artificially low? And in what way might they mitigate their risks? - sorry, I suppose that is actually 2 questions!

Hopefully, all will become clear when we hear who has been taking the keenest interest lately in GKP's mind-boggling assets, and how that translates into bids or asset sales.

I agree that there will be a number of parties that would be interested in GKP, but you could probably count on the fingers of one hand those that might be sufficiently intersted to table a a realistic bid - Exxon, Chevron, Conoco and Sinopec.

Just as one bidder might like to see the SP kept low, so might a consortium of say 2 or 3 companies, and the cost would be peanuts if they were almost certain to be successful.

I don't see this as a hole in my argument, just an acceptance that we may well be pawns in a massively important game of chess. But even a seemingly innocuous pawn can help to win the game sometimes....and certainly has a strategic part to play!

This is actually quite an interesting thread as it highlights people's differing perceptions about the SP and whether or not there is at least an element of 'control' being exercised.

In my book, the word 'manipulation' is perhaps rather too emotive, as it smacks of dirty underhand deals and insider trading. But if you were to describe it as someone seeing an 'opportunity' to keep a price within a relatively low range and profit from doing so, many would regard this simply as a clever and effective use of financial muscle. But the RESULT is EXACTLY THE SAME.

Whatever people's views of the 'Shares on Loan' theory and price control that is certainly possible as a result, nlper has IMHO beautfully illustrated how those figures rose dramatically at certain key moments in GKP's history.

Bear in mind that about 1 year ago, the SP was standing at almost the same level it is today, while the OIP figures (1.9 BILLION P90 at Shaikan) were less than a Quarter of the latest figures (8 BILLION P90 at Shaikan alone) and it would not be a stretching imagination too far to recognise that 'something' has been holding the SP back.

It is up to you of course as to what you think best explains this discrepancy. But recently we have witnessed the high profile Thomas Cook Group falling 75% in one day on poor news and the SOL rising by 50 million at around the same time. It is therefore only a matter of deciding whether the SOL were used to help exaggerate the fall, or were a simple and perhaps deserved reaction in the market place to poor news. Personally, I think that the SOL have played a key part there... just as they have with GKP!

What seems different about GKP though is that, when the SOL has risen dramatically, it has invariably been on the back of apparently very good news. So, rather than being used to induce a major fall, it would appear more likely that they have been used to stem a possible substantial significant price increase.

In my view, as nlper intimates, the increase in those figures is clear testimony to the fact that someone has sought to 'control' the SP - wouldn't you if you had the ability to do so and KNEW that you could benefit by doing so?

Interestingly, we spent many weeks on this board discussing how a low T/O bid might succeed while the SP remained very low. That was mainly when world events had conspired to make so-called high-risk equities appear even more risky than perhaps they really were. In any event, whether long or short on GKP it was very apparent that many people were convinced that GKP could be vulnerable to low bids.

The question I have been asking myself lately though is whether the same situation could apply to 'someone' who might be prepared to make NOT a low-ball bid... but what might be seen as a very fair bid... given the scale of GKP's current finds and state of development.

For the sake of argument, suppose the offer on the table was £10 per share, and the bidder was a super-major, I imagine that a large number of investors here would see them as a 'Knight in Shining Armour' who had arrived just in the nick of time to save us from an otherwise unpalatable fate. Exxon would certainly match that description, as would Chevron.

But would it not be just as much in THEIR interests to see a low SP at present and almost guarantee acceptance of the bid, as it would have been for some Venture Capitalist who might in the past have been hoping to land the 'biggest fish' in the Kurdistan sea of oil with a comparatively small bait?

Fortunately, I very much trust the BoD to deliver the best deal that they can to us as shareholders, as their interests are aligned with ours due to the size of many of their shareholdings. But you should never IMHO lose sight of the possibility that Games will undoubtedly be played until the event we are all hoping for becomes a sudden unexpected reality.

Amid all the euphoria we could easily miss out by failing to look at the bid carefully and critically, in the cool light of day.... and should therefore be willing to consider ALL possible eventualities.

The longer that GKP lasts (and I still hold out my hopes for mid to late 2012) the higher will be the OIP numbers and therefore the valuation put on our assets. That is an indisputable fact... unless you think that the Oil price will fall dramatically or that GKP will not discover a single drop more oil! In turn, that SHOULD lead to a higher T/O price, and certainly nothing like the completely unsubstantiated figure quoted on here earlier today.

In that sense, Baron von H, I am completely with you in that I will not be swayed by the irrational movements in the SP, whether 'controlled' or simply down to 'normal market forces'. But, unless people all recognise how the rich and the powerful can directly and indirectly influence the SP, there will be others that WILL fall prey to those games.

I never cease holding on very tightly to my 'Golden Tickets' because IMO I am unlikely to see such an opportunity again. However, I will equally not dismiss out of hand any thoughts/views others choose to air - especially those that give some credence to the theory that GKP is a prize catch of such huge importance... almost anything as possible!

Thanks again nlper for that intriguing SOL/SP chart comparison which helps us all to clarify our thoughts.

Best regards,

scaramouche

=============

Despite nationwide investment, Exxon has Iraq output doubts

An employee works at the Tawke oil field, which is administered by the semi-autonomous Kurdistan region. (MUHANNAD FALA'AH/Getty Images)

By BEN LANDO of Iraq Oil Report
Published December 10, 2011

If Iraq achieves its stated production capacity targets of 13.5 million barrels per day in seven years, it will become the largest oil producer ever.

ExxonMobil isn't counting on it, according to its energy forecast through 2040, which was made public Thursday.

"It's kind of interesting that if you look from today until 2040, the three top producers of oil will remain the same, and that's Saudi Arabia, Russia and the United States," said William Colton, Exxon's vice president for corporate...

================

Author	scaramouche View Profile Add to favourites Ignore
Date posted	2011-12-01 18:16
Subject	Once in every Blue Moon.....
Votes for this Posting	Voted 254 times.
Message
This is quite a long post, but please bear with me as I think you might find it interesting..... When GKP made its initial oil discovery at Shaikan on 6 August 2009, I had never heard of the company and knew very little of Kurdistan! A friend pointed out to me a few days later the extent of GKP’s initial discovery, with preliminary estimates ranging from 300 to 500 million barrels, and it sounded very interesting. I did some basic research and it was quickly evident to me that GKP had discovered something very special. My quandary was that the SP was already at 35p, having already risen about 200% since that initial announcement – it sounded risky! However, I decided to dip a very tentative toe into GKP, and over the last 2 years I have frequently added whenever buying opportunities arose and funds allowed - so much so that I now have at least both feet and legs well and truly submerged in GKP’s vast ocean of oil. I doubt that my story is much different to many of you here! But what was it that made GKP different to other exploration companies that have announced sizeable discoveries, and made me prepared to take such a risk? The answer is quite simple – we were soon talking BILLIONS, not millions, of barrels of oil. And what is perhaps most intriguing to me is that it seems that TK and perhaps a few others always knew what was likely to be there... In that famous interview way back on 25 November 2009, an excited Todd Kozel seemed unable to contain himself when he announced to the world that GKP’s SHAIKAN discovery could amount to 10 to 15 BILLION barrels. http://www.youtube.com/watch?v=jVXyfvPfC7M It was such a seemingly ridiculous assertion that, for many months, most people laughed at what he had said - as though he was the biggest ‘ramper’ of them all. The confirmed figures at the time, Todd said, were “only” from 2 to 4 billion barrels. We were therefore all pretty gobsmacked(Well, smack me in the gob because I am just speechless with surprise! , GOB A small mass or lump. Informal. A large quantity. Often used in the plural: a gob of money; gobs of time.) I recall, when DGA upped their assessment to 4.2 billion barrels (P50) on 14 January 2010. And even that was derided by certain elements of the UK media, who dismissed DGA as lacking the necessary credibility for their estimates to be reliable. But then, on 26 August 2010, the broker Fox Davies made some early comparisons with Kirkuk following an analyst visit to Kurdistan. http://www.fox-davies.com/media/187477/fdcgkpaug262010.pdf Extract: “We are not changing our broad assumptions on Gulf Keystone as a result of this trip; however our confidence in our current forecasts and estimates has been increased. The upside potential is clearly huge and on par with the size of the Kirkuk field, i.e. 20Bbbl recoverable, and relies on the three structures of Shaikan, Sheikh Adi and Ber Bahr to be filled to regional spill point as currently interpreted from pressure gradient data, with Akri Bijeel providing additional upside”. It was then, about one month later, on 15 September 2010 that Spidy’s legendary ‘GKP NAV calculator’ was born http://www.navcalculator.com/GKP_NAV.php , allowing people all over the world to see the POTENTIAL value of GKP. Of course, there were many dissenting voices who were keen to dismiss this proposition. After all, Kirkuk initially had about 60 BILLION barrels OIP, and for GKP only Shaikan-1 had so far been drilled. However, the jigsaw was starting to come together. On 6 December 2010, MOL announced that their first exploration well on the Akri-Bijeel block had found a further 2.4 BILLION barrels OIP. Then, on 31 January 2011, the long awaited Ryder Scott report essentially confirmed that DGA’s 4.2 BILLION (P50) for Shaikan (based only on SH-1) was correct. Attention had also started to shift towards the possibility that Shaikan, Sheikh Adi and Ber Bahr could be linked. We started to hear phrases like “possible Regional Aquifer” and, “one massive structure” more often, plus the now almost commonplace “potentially filled to spill”. On 14 April 2011, GKP confirmed that the proven OIP figures for Shaikan had increased by 80% to 7.5 BILLION on a P50 basis. And then on 10 August 2011, we got our first mention of Sheikh Adi with a preliminary estimate of 1.9 BILLION barrels (P50). On 31 August 2011, Todd Kozel appeared on CNBC apparently to quash rumours in the media that GKP was up for sale. http://video.cnbc.com/gallery/?video=3000042718 Once again, he was in exuberant mood as he explained that GKP had already proved up 12 BILLION barrels of oil across 3 licences, and still had huge upside potential including up to 20 BILLION barrels on one of those licences. And even this didn’t even take into account the possible Daddy of them all – Ber Bahr. Next we heard that Bekhme-1 (the second exploration well on the AB block) had reached TD of 5000m in October 2011, although it had originally been intended to drill only to 3000m. It seems reasonable to assume that Mol had very good reason to do so, and now we all wait with baited breath for that imminent confirmation of maybe another 6 BILLION barrels. Most recently, on 8 November 2011, the Shaikan figures went up again, now 10.5 BILLION (P50), with a new P10 of 13.4 BILLION. And note that even this does not account for the P1 or ‘full to spill’ scenario. On top of this, Shaikan-4 was at 3265m (nearing TD) on 24 October 2011 and seems destined to demonstrate a further increase in those figures; while SH-6, which is due to spud later this month, is the well that is commonly expected to prove or disprove the ‘full to spill’ theory. And finally, the eagerly awaited first exploration well on Ber Bahr spudded on 10 October 2011 under the new stewardship of Tony Hayward and the combined Vallares/Genel. The intended TD of 2100m should be reached in about January 2012, and we must be getting very close to hearing news of early oil shows from there. Remember that Forecasts are that Ber bahr could have 1.5 times the oil of Shaikan, although it is very early days to be thinking about such figures. So, as TK said in his CNBC interview “The Good News is - it just keeps getting bigger and bigger”. But the real point of this post is that, ever since TK first appeared on CNN, what seemed at the time like almost irresponsible predictions... have ALL been coming TRUE. • TK was predicting 10-15 Billion barrels at Shaikan in NOVEMBER 2009. We are very nearly there. • Fox Davies was considering a possible next Kirkuk” in August 2010. We now have massive oil discoveries at Shaikan (10.5 billon), Sheikh Adi (1.9 billion) and Akri-Bijeel (2.4 billion + impending results from Bekhme-1), with Ber Bahr news coming soon. • And believe it or not, our brilliant sage BBBS first referred to 20 BILLION barrels OIP at Shaikan on 14 January 2010 and referenced “Kirkuk’s bigger brother” in the same post. http://www.iii.co.uk/investment/detail?code=cotn%3AGKP.L&display=discussion&threshold=0&action=detail&id=5804969 BBBS also referred to the strong possibility of 100 BILLION barrels almost 18 months ago to the day, on 30 May 2010, and Spidey’s NAV calculator was subsequently assembled allowing for a potential 100 billion barrels across all the 4 blocks. So, yes, it clearly takes months and even years to PROVE the validity of these predictions - but, to my mind, the evidence is that some people have KNOWN the scale of this find for nearly 2 years. *** You have to wonder whether there are others, party to GKP’s data (the KRG, perhaps Exxon, Chevron and Sinopec) who also KNOW that this is true ***. Think about it - a potential 100 BILLION barrels across the 4 blocks, with 30 BILLION recoverable and GKP having an overall average of approximately a 40% interest (or 12 BILLION possible reserves).... and we have so far proved the existence of just 15 BILLION OIP, although I have little doubt those numbers are about to rise.... dramatically. And the moral of the tale? It is actually a simple one. Don’t sell yourself short, and don’t sell out too early –opportunities like this come around exceedingly rarely... IMO about once in every blue moon! Personally, I think that Todd (and BBBS) have been trying to tell us this for about the last 2 YEARS. So, does anyone really think that the 'super-majors' are going to wait while those PROVEN OIP figures rise toward an almost unimaginable level in 2 years time of potentially 100 BILLION barrels.... when they almost certainly KNOW already? AIMHO and please DYOR GLA, scaramouche ==============

Subject	Discussion	VotesAll1+2+3+4+5+10+20+50+
30-11-11	Re: Question/s for GRAMACHO	GKP.L	60
	villebois, There is a quite a bit more flexibility in planning for an onshore development than is the case offshore. You can’t readily change the concept offshore whereas there is flexibility to change or modify on land. Exxon/Chevron/Total/Shell/BP will all have particular concerns and requirements for the topsides design to ensure their safety standards are met (can’t speak for the Chinese). That is not to say that a GKP supervised design would be unsafe, far from it, but thesupermajors have their particular requirements to meet in house standards. However these are handled in the Detailed Design which follows the FEED and Field Development Plan. The Detailed Design is likely to take place in 1H 2013 and would be handled by an EPC contractor favoured by whichever supermajor is in place. So no I don’t think Exxon for example absolutely has to be in place in 2012 before the dev plan is submitted. However they will say different. Exxon will be telling the KRG that they should be in place so they can accelerate development and use their expertise to optimise the depletion plan. The depletion plan is that part of the development plan that deals with how the wells will be positioned and produced and what fluids, if any, will be injecdted to achieve a high plateau rate and high overall recovery. They will also be suggesting that if they commit in 2012 it cannot be at full price because the technical work is not complete and from their perspective risks remain until the reservoir properties are better understood. What GKP has to do is convince the KRG that it is not hindering the development of the field from the perspectives of pace or scale that could be achieved by a supermajor until the time is right for a supermajor to participate. The better the job GKP does the longer the KRG can afford to leave it as operator growing the value of its assets and the company. The dual scale development plans were a master stroke in that regard. Has it done a good job so far? For the most part yes so I don’t see the urgency yet for the KRG to intervene and facilitate early entry of Exxon or the Chinese at a giveaway price. We may see a compromise wherein they get entry via the back in rights only during 2012. As a partner Exxon could have input to the technical work and the dev plan and if it likes what it sees make the killer bid in late 2012 with a lot of confidence that the remaining risks are understood. Regards, Gramacho

Author	scaramouche View Profile Add to favourites Ignore
Date posted	Sunday 22:30
Subject	Olympic Gold.....
Votes for this Posting	Voted 108 times.
Message
I first posted on this board on 1 December 2009 with a post perhaps prophetically titled ‘The Land of Giants’. If anyone had told me then that I would still be contributing to these discussions some 2 years later, I would have laughed! But here I am, with my great hopes for this investment undiminished, and still in effect on course for my (Olympic) dream. The characteristics I most admire about our Olympians are that they continually set themselves challenging targets; they do everything humanly possible to meet and exceed those targets; and they never ever give up. Although few of us, I suspect, can but dream of competing at such events, IMHO we would do well to maintain much the same ideals! In the last few days, what we have seen on this board though is IMO the difference between those who set their aspirations very high and those who are broadly content to accept whatever happens. There is nothing wrong with either view... but I suppose you could say that I prefer to see the bar set high! THE RUMOUR that GKP may be about to receive a bid from Chevron for $10.4 billion (or about £7.50 per share) has seen many hinting that “the end is nigh!”, and we might just as well accept it as a ‘fait accompli’. After all, we will all do well, the KRG does perhaps have some justification in influencing who gets to take on GKP’s assets, and no doubt Uncle Sam will prosper in the end.... with scant regard for what we as investors might think is fair. - I don’t subscribe to that view. I have written at length as to why I believe that the ‘rumour’ itself is likely to have some basis in Fact. But I am not now convinced that the alleged Sinopec offer of maybe £25 per share is real since, to me, GKP has yet to prove up sufficient of its assets to warrant quite the level of disparity that we have been discussing. Nor am I convinced that the KRG would ACTIVELY intervene in a clearly unreasonable manner, so as to effectively deny us the right to anything like the true worth of the company. If they do, I think we should prepare to come out fighting! What concerns me most though is that it appears to me that many investors may have already hit ‘the wall’ and have little enthusiasm left for completing what has undoubtedly been a demanding Marathon for many. I have seen a growing number of what I consider Unproven ASSUMPTIONS stated as though they are facts, and I believe that this may have an influence on deflecting us from our main objectives: 1. I have read that the Institutions would happily accept an offer of £7.50 per share (certainly £10), especially with the SP at 171p, as their focus is on their annual targets and bonuses. That may be true for some but, for those that have done their homework, it would be to wilfully throw away a much greater potential opportunity. 2. I have read that people’s Fears have been heightened by the Global uncertainties that have been prevalent throughout 2011, and that 2012 could be worse... so any reasonable offer now would be a good way of eliminating that risk. But where is that braveheart mentality that so many have spoken of in the past? 3. I have read that, since the OGL may not be passed quickly, any would-be buyer would have to take this into account when tabling their bid. They might do - but maybe it is just a convenient excuse for CHEVRON to join the party now, while Maliki’s visit to Washington tomorrow may actually herald a new era for US/Iraqi relations and the imminent removal of some of those hitherto challenging political barriers. I think we should always be prepared to raise our own expectations! 4. And I have read that we could be some years off being able to prove up our assets fully, with the result that we must all make a direct choice between accepting a good offer now, or perhaps having to wait for an indefinite period for another one to come along. But, if so, what has happened to that competitive bulldog spirit, and who said that, in this Herculean test of endurance, holding shares in GKP was ever going to be easy? Seriously though, I do share many of the same concerns that are outlined above, but I have an uneasy feeling that we are being railroaded into thinking that we will have NO CHOICE but to accept a so-called “done deal”. What I see as the deliberate suppression of the SP since April 2011 to a fraction of its intrinsic value, has I believe also helped to condition us to almost grateful acceptance. But, with so much news on the horizon, I do wonder why we are thinking like this... • Bekhme-1 results should be out BY THE END OF DECEMBER and could add 6 billion (P50) to the OIP figures. • Shaikan-4 seems to have been drilling forever, and is strongly expected to see a big increase in our OIP figures for Shaikan... VERY SOON. • Ber Bahr-1 has been drilling for 2 months (since 10 October 2011), and has a target depth of only 2100m. Oil shows could be announced... ANY DAY NOW. • Shaikan-6 is scheduled to spud this month and, only 6-7 months from now, should reveal the OWC level, with the heightened expectation of proving that Shaikan is full to spill. • As I mentioned in a recent post, there are those out there who have known for nearly 2 years what GKP is sitting on, and data in the course of the next 6 months could so easily reveal the links between Shaikan, Sheikh Adi and Ber bahr and demonstrate the existence of ONE colossal 'connected' structure. Given all this, and the likelihood that we may have to wait only A FEW SHORT MONTHS to see the fulfilment of our dreams, why would anyone – Institution , HNW investor, PI or member of GKP’s BoD - choose to give way to the first offer that appears on the table? They always have a choice! Of course, I can certainly see why Chevron (or maybe Exxon) might want to persuade some of the more battle-weary investors to part with their shares before those few months elapse. But if, like me, you see this as something akin to the pursuit of the Olympic dream, you will surely want to see this through to the bitter end. *** I very much hope that many of those institutions and HNW investors who are presently heavily invested in GKP therefore get to see and think about the contents of this post, and consider whether they would be making a huge mistake by bowing to the pressure which will very likely soon be put on them to sell... sooner than they should ***. Incidentally, the 2012 London Olympics are scheduled to start on 27 July 2012 and most would I think agree that this is NOT very long away. By the same date, I would personally be surprised if we had not already hit TD on SH-6, and proven up a MASSIVE increase from the current OIP figures.... which already total 14.8 BILLION barrels (P50). I can also easily imagine TK standing on a Kurdistan podium clutching his own Gold Medal, with a Nebuchadnezzar of champagne in his hands, and a banner behind him with the inscription.... “I always knew it was Filled to spill!” Yes, rightly or wrongly, I AM still chasing THAT dream! GLA, scaramouche =============

Sinopec	daeyeon	13
	http://www.reuters.com/article/2011/12/09/us-brazil-oil-sinopec-idUSTRE7B80S520111209 To quote, 'BG says that its has as much as 8 billion barrels of oil and natural gas equivalent reserves in the Santos subsalt pole. Assuming it plans to sell only a minority stake, the sale could net the company as much as $27 billion, an analyst said. The estimate is based on the sale of 49 percent of BG's Brazilian unit and values its reserves at $7 a barrel, a price considered reasonable. At 5 dollars a barrel, another level considered possible by the analyst, a 49 percent stake would net BG $20 billion.' This is offshore, requires a lot of investment to develop (more expensive than onshore). So $5 and $7 is a general consensus here and what the Chinese would be happy to pay. $5 x 2.25B (GKP's share so far, with lots of significant upside expected over the coming months remember) = $11.25B. That equates to 7.2 GBP / 900m shares gives us 800p. Let's hope the rumours aren't true just yet. The Chinese have made another investment, http://www.businessweek.com/news/2011-12-11/sinopec-to-invest-1-billion-to-boost-australian-lng-stake.html 'Sinopec Group, as the company is called, signed an initial accord to acquire a further 10 percent of the venture, Sydney- based Origin said in a statement today. Sinopec Group, which agreed to pay $1.5 billion for 15 percent of the project in April, will also buy an extra 3.3 million metric tons of LNG a year through 2035, clearing the way for an investment decision on the second phase of the $20 billion Queensland state venture. The accord comes a month after Sinopec agreed to invest $5.2 billion in Galp Energia SGPS SA’s Brazilian unit, taking a 30 percent stake. Chinese energy companies have bid at least $16 billion for overseas oil and gas assets this year to expand reserves and supply the world’s largest energy consumer.'

Oil power struggle as U.S. leaves Iraq

By Arwa Damon, CNN

December 12, 2011 -- Updated 1237 GMT (2037 HKT)

Oil returning Kurdistan to former glory

STORY HIGHLIGHTS

• Fight brewing over who has the rights to sign oil contracts for Iraq's Kurdish region
• Exxon Mobil signed a deal with the Kurdish regional government that Baghdad says is illegal
• Gulf Keystone says it is working an oil field of at least 8 billion barrels -- one of the largest oil fields covered in this part of the world
• As Kurds insist they should sign the oil contracts, they also remember Saddam Hussein attempts to wipe out their communities

Erbil, Iraq (CNN) -- Along the road in the semi-autonomous Iraqi region of Kurdistan frozen oil bleeds out of the rock face.

For Todd Kozel, CEO of the independent oil and gas exploration and production company Gulf Keystone, it was an irresistible lure at the time few were daring to invest in Kurdistan.

But not all is well in Kurdistan and old arguments with Baghdad over oil power and revenue are likely to loom large as U.S. forces withdraw from the country.

Kozel says Kurdistan offers opportunity. "To be able to compete with majors we have to be able to go places and do things and try to find opportunities that are unconventional," he says.

"After that first visit, I never looked back. After visiting Kurdistan in June of 2006 and literally seeing oil running down rocks at a road cut, I was just fascinated. I had to be here and I had to participate."

At the site where it all began, Shaikhan 1, drill manager Michael Chisnall remembers the day they realized they had hit it big.

"As we carried on the drilling process it was one of those things where I use to say to Todd or send an email everyday with an operational update that we have a big problem. We just cannot stop finding oil."

Iraqi Kurds worry about future

Kurds anxious over U.S. troop withdrawal

Iraq fuming over Exxon-Kurdistan deal

Initially they had estimated the Shaikhan field held about a billion barrels of oil.

"It's turned out to be something that we never would have dreamed, that it would be this size. It's now an oil field of 8-13.5 billion barrels and that's one of the largest oil fields covered in this part of the world in history," Kozel says.

The risk he took turned out to be well worth the reward.

"Our market capital was 45 million pounds (about $70 million) in August of 2009. Our market cap right now is 1.6 billion pounds as a result of the Shaikhan discovery."

The Prime Minister of the KRG, Barham Salih addressed the conference, emphasizing: "I also say to our partners in Baghdad very clearly, Kurdistan has a constitutional right to develop its own oil resources."

Speaking on behalf of Baghdad, Moaffak al-Rubaei, former national security advisor slammed back calling the deal illegal, threatening to ban and sue the oil giant.

"In Baghdad some people view this contract to be targeting the federal government, to weaken the federal government and it has some political connotations."

But the Kurds will not be stopped.

"Development of oil resources in Kurdistan is a contribution to the Iraqi economy," Salih told CNN.

"But there is also one other factor. Our recent history is very instructive. There is no way that we will be dissuaded from our constitutional right to developing our resources and allow ourselves to ever again become hostages to the whims of some bureaucrats in Baghdad. We've been there before. Oil was used to strangle our people, to commit genocide."

Iraq's tantalizing oil wealth could very easily turn from a blessing into a curse.

============

Author	Gramacho View Profile Add to favourites Ignore
Date posted	2011-11-28 16:38
Subject	SPE Conf Report Part I GKP Paper
Votes for this Posting	Voted 140 times.
Message
The SPE held a “Continuing Education Seminar” last month. This covered activities in Iraq and Kurdistan. We were very fortunate that oilman63 attended the event at some personal cost and gathered a great deal of information during the day. I was abroad at the time and unable to attend but have reviewed and summarised the material/findings and incorporated thoughts/interpretations where appropriate. As mentioned in an earlier post, concurrence was obtained from GKP to release this on a public BB as it was unclear whether GKP had envisaged this happening in agreeing to present at the seminar. So here is Part I of the Conference report, a summary of key points from the GKP presentation by John Stafford. Some of the points are reconfirmation of what is already known and some are new learnings. Part II will follow tomorrow and will cover questions posed by the SPE seminar attendees and oilman63 in a one to one with John Stafford. GKP PRESENTATION – Experience of Operating in the Region and Future Outlook The first thing to say is that the slides are not designed to aid reproduction or interpretation. They are in hard copy form only (and by implication will not be published)and they are in black and white. There are about 30 slides but the format is 3 slides/page with a notes section alongside each slide which means the pictures are very small. Many of the slides have been seen before or don’t contain much information so the discussion below focuses on the better ones. Slide 8: Interesting discussion on security and how GKP used local companies “rooted in the community” that knew who should and shouldn’t be there, who were the good guys and bad guys etc. Slide 9: KRG has a ministry with maps of minefields. There is one known field in Shaikan that is delineated. Slide 10: There were about 150 finds of UXO in the area searched. Mostly bullets but from the pictures it looks like at least one land mine and a couple of mortars were found. Slide 11: No ordinance related HSE events in shooting the seismic. Seismic camp in operation for 9 months with over 500 people. Large % locally sourced hires. Slide 12: This is one of the slides that many have wanted to see, a comparison of the old 2D data, line SN-08-12, versus the 3D.The significance of the 2D line is that Sh-5 is being drilled on that line. The 3D line presumably runs close to the 2D line and is a PSTM line which is an intermediate stage of processing in which the reflectors have been moved from their apparent positions in time to real positions in time. In a later stage of processing the reflectors are shown in their correct positions in space. Nevertheless it is easy to see there is much improved clarity in the reflectors on the flanks of the structure and also in the deeper sections. I suspect the Permian will be better imaged on the 3D. The crest of the structure doesn’t look much different TBH but it is hard to see at the scale presented. Hence there could still be some surprises in Sh-5 which is close to the spine of the structure. IMO the well will help the GKP interpretation because it will provide actual depths of formation tops to calibrate the seismic in an area of poorer seismic quality. JS confirmed what Chris Garrett said in Manchester. Where you get the Tertiary cover on the flanks of the structure you get good signal to noise ratio and good reflectivity. As you move on to the crest of the structure where the hard Cretaceous limestones are exposed at the surface the signal to noise ratio goes down and the problem is compounded because you can’t get the vibrators up there and have to revert to a dynamite source. I believe it is linked to the karstification of the rocks (dissolution by rain water that creates vugs and caverns etc.).(((geology) Formation of the features of karst topography by the chemical, and sometimes mechanical, action of water in a region of limestone, dolomite, or gypsum bedrock. )) Slide 13: Is a 3D seismic line through Sh-2. It shows Sh-2 has been deviated to the north. I believe this may have been done intentionally for coring purposes because it looks as though the well has entered the formation orthogonally to the beds. There are two implications to this. Firstly the reported along hole thickness of the net pay zones will be slightly lower than if the well had intersected the dipping beds vertically. Secondly there will be an error in the straight conversion of the reported measured formation tops to a subsea depth using the surface elevation data. The actual subsea depth will be somewhat shallower so calculating lowest known oil for example will have an in built error without knowledge of the well deviation data. The well won’t be as deep subsea as at first appears. Slide 14: This is a July 11 Top Alan Depth Structure Map. It is only 6cm x 1.5cm (and in B&W) so it is hard to see what’s going on! It is confined to the Shaikan block outline so implications for the Al Qush and Sheikh Adi blocks are difficult to interpret. Also the north and south faults intersect at the block boundary with Al Qush which was not the case with the map in the DGA report. There looks to be some evidence of limited closure to the north of the northern fault but as fault positions have moved it is hard to say whether this has added any area to the structure though we do know GKP have said the structure is 5-10% bigger on the 3-D. Slide 16 Well Ops: The testing kit was initially 30 yr old technology (my era lol!) and though it worked ok they are now using more modern equipment kit and getting better results. There are more of the large service company equipment providers now (Schlumberger for one) and this will benefit GKP with better choice and availability. Slide 19 EWT Facilities: JS indicated the Shaikan GOR =Gas Oil Ratio is 400 scf/bbl. This is higher than any of the Jurassic tests reported to date and begs the question was he mistaken or does he have the results of a recent unreported Shaikan test fresh in his mind? There is no doubt there have been problems with the measurement of GORs as they have been all over the place and this comment has added further uncertainty. If a recent test has produced 400 scf/bbl this would be very good news as it would provide more internal energy and suggest a lower oil viscosity. The facilities upgrade to 15k bbl/d should be on line early next year. Slide 22: GKP has demonstrated that the Jurassic works without a classical top seal. The crest of the structure is breached at the Cretaceous. (I believe they have said the structure is essentially sealed by a tar mat.) GKP has derisked the Jurassic and Triassic for other operators. Slide 24 Company Forward Growth Strategy: JS indicated the 440,000 bbl/d capacity for the pipeline is for Jurassic crude. Slide 26 2011/12 Work Program: The same slide as presented at Manchester. I was amused that JS used an observation from one of my posts that the peak activity level of 7 rigs exceeds all operators in the N Sea except perhaps Statoil. GKP continue to monitor the BBs lol! Slide 28 Conceptual Development Plan: This appears to be slide 16 of the Sept strategy presentation showing the Shaikan development well pads. 55 wells in the Phase 1 Jurassic (this will likely change as more appraisal well results come through). JS made the interesting point that each Shaikan well pad was like a Nth Sea field recovering 100 MMbbl+ (actually more like 200 MMbbl). JS reemphasised that the 440k bbl/d is Jurassic only and that GKP has considerable resources in the Triassic and deeper exploration targets in the Triassic. He also stated that the wells were enormously productive and PIs of over 100 have been seen. PI = Productivity Index = BOPD/psi of pressure drawdown exerted at the wellbore. This is a considerably higher PI than has been reported in individual tests e.g. Sh-1 Sargelu PI = 30 bopd/psi. If true this is good news as high PIs are synonymous with high well productivities and can also be an indicator of a large well drainage area. Slide 29 Looking Forward: Some very encouraging news that the right data is being collected and the right technical work is being done to understand the reservoir and produce a credible field development plan. First pass time and depth models are completed but are being improved upon. A geocellular model is being built. This is a static model of the reservoir providing the spatial distribution of all of the geological, geophysical, petrophysical, fluid and rock data throughout the reservoir. This will be the feedstock for an Eclipse dynamic reservoir simulation model. (The Eclipse model will be used to produce field production profiles to support the field development plan.) Having enough information to populate and calibrate the models is a challenge and that is why the appraisal well data is needed. I was particularly pleased to learn that the core data base is over 300m now closer to 400m with recent cores, more on this in the Q & A. Slide 30 Looking Forward (II): Mentions opportunities exist for: • Upside resources associated with deeper exploration targets • Upside resources associated with drilling new prospects • Asset rationalisation and trades Inclusion of “Trades” in the latter bullet is particularly interesting. This implies swapping one piece of acreage for another possibly with a part cash consideration included. The only one that springs to mind is a swap of MOLs 20% in Shaikan for GKPs 20% WI in Akri Bijeel. However that doesn’t maximise the cash generated for GKPs 20% of Akri Bijeel to aid Shaikan development funding so I can’t see the logic there even though GKP might like more of Shaikan. JS pre-empted any questions on the AB sale by indicating it is a story for another day. Watch out for Part II tomorrow when we get to ask the questions and Ewen comments on a couple of the findings. Regards, Gramacho ============

Author	Gramacho View Profile Add to favourites Ignore
Date posted	2011-11-29 16:34
Subject	SPE Conf Report Part II GKP Q&A
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Here is Part II of the SPE Seminar report, a summary of the questions posed by the SPE seminar attendees and afterwards by oilman63 in a one to one Q&A with John Stafford of GKP. Some comments by Ewen have been included. The one to one includes a high level description of the technical work being conducted which has not previously been revealed. I have included some insights such as a description of the recovery factor uncertainties (IMO) they are trying to resolve and why this is important to a bidder. There is also something of a surprise (or maybe not) regarding a Sh-2 test that was followed up during discussions with Ewen. Part III will be a separate post that will focus on the DGA presentation which contains some interesting stuff on oil generation. POST PRESENTATION Q&A Q. With the increasing number of operators are you finding it more difficult to sell to the local market or will they take whatever comes out? A. We do what ministry tells us in terms of sales. The Ministry largely controls how that works. It is at the behest of the Ministry how we operate. [This is perhaps the most frank admission that GKP currently doesn’t have much control over when and where it produces. Ewen believes this is true for all operators as it is the state’s oil.] Q. Any comments on the aquifer? A. We think we have aquifer support. In an early well test we saw evidence of earth tides from the downhole gauge, 12 hourly diurnal variations in pressure. Typically they only occur when you are plumbed into a big aquifer that is connected to a recharge area. By analogy we think we are connected to an aquifer beneath us, we think there is probably aquifer support but we don’t know. [Some may remember this came up some time ago after JG mentioned it. At the time it was speculated that this could infer a link to tidal effects in the Gulf hundreds of km away which seemed extraordinary and caused a bit of a stir on this BB. However it turns out that this effect does not infer connection to the sea. The recharge area JS is referring to is a surface outcrop that receives rainwater. Aquifers connected to the surface can act as giant barometers and the ground water level can vary according to the position of the sun and moon. Later on JS mentioned there are no surface outcrops of the Shaikan reservoir rocks (presumably referring to the Jurassic) within 100km. So JS could be indicating that the data suggests the aquifer is at least 100km long. If this is the case then IMO it is likely to be capable of providing some aquifer pressure support which is potentially a good thing.] Q. Have you done interference testing? A. We have done interference tests between Sh-1 and Sh-3 they are 800m apart at Jurassic level. We saw extremely good response between the two wells. There is definitely communication between the two wells. We did not see communication between Sh-2 and Sh-1 but we would have been surprised if there was as they are 9km apart we weren’t doing enough to make that happen. [The Sargelu/Alan is on EWT in Sh-1 and this was tested over a short period in Sh-2 before drilling ahead. GKP has indicated it will put other zones on long term test so there may not be an opportunity to prove/disprove communication at Sargelu level in the future. Remember that JG pointed out the absence of communication between Sh-1 and Sh-2 would not be a concern. Sh-1 and Sh-2 are 9km apart and compartmentalisation is only a concern when the compartments are small enough to adversely affect the well count.] Q. Are you expecting water production? A. A dry system has been assumed for EWTs(Early Well Tests !!). However we have modular generic designs. We have bolted on water if we needed it. At the moment we don’t think we will need it. [TBH don’t understand this answer as loads of water was lost to the formation during drilling and much of it can be expected to return as a well cleans up during early production. Hence some water handling capacity from the outset would be prudent] Q .What is the API Gravity and GOR? A. GOR 350 – 450 scf/bbl. It is fairly toxic stuff it is 15% H2S and the APIs varies from 20 to 16 API. The pour point is very low. Its viscosity is relatively good for that level of crude. It moves really quite well , once you get it moving its stays moving. [Again he mentions the 400 GOR discussed in Part I which is higher than reported for the Jurassic. The low pour point is good news for GKPs pipeline design.] Q Oilman didn’t catch the question but here is JSs answer (Questions on a post card please lol!) A. There are lots of questions. Fractures will dominate production for some time. We are running some (SCAL=Special Core Analysis) at the moment that could help us resolve that issue. The thing is we don’t know yet what the matrix block size is yet properly. We have got a range, some bounding parameters but we don’t know whether we are dealing with huge columns that are going to react in one way or tiny little sugar cubes that are going to react entirely differently. So at the moment we simply don’t know. There are a whole range of issues that are to do with wettability out there. [This is discussed in more detail in the one to one.] The development concept envisages deviated wells not horizontal wells. Yes we have drilled some deviated wells. Sh-1 was deviated north. Sh-2 was deviated. And the experience of drilling deviated wells was not entirely pleasant. It is a tough environment as we have heard from previous speakers. In Sheik Adi we had a 20m bit drop in the Cretaceous. Q. How deviated are these wells? A. The maximum deviation we have gone to at the moment is about 25 deg. We have actually overcome these problems now. We have learnt to deal with the difficult upper section. In the difficult upper section you get total losses, bit drops, swelling shales. But we have got techniques in place now that manage that, so we are confident that we can achieve what we set out to achieve. Q. Can you elaborate on the techniques? A. It is basically air and foam drilling rather than a standard mud system. We have seen significant improvement in our operations. For example in Sh-1 we lost over 400,000 bbl to the formation and in Sh-2 it was 10% of that. Q. How are you selling the crude? A. It is sold at auction. It is dictated by the market. The Ministry has increasingly started setting prices now. But historically it has been set by auction. ONE TO ONE Q&A OILMAN AND JS OF GKP Oilman put a number of questions to JS posed by him and KOEP members. Q. What is the volumetric significance of the dolomite zone in the Triassic in Shaikan? A. Not sure we have released that information. The DGA report on our website does list separate resources. I know the internal ones but we haven’t released those. It is around 85% to 15% Jurassic to Triassic at the moment. There is scope to increase the Triassic. [Ewen subsequently pointed out in the recent conversation that so far only about one third of the Triassic has been penetrated.] Q. What does the new core taken in Shaikan tell us about the rocks? Porosity, fracturing, recovery factors? A. That is work in progress is the answer. It tells us it is a very fractured reservoir. He did not want to comment further. Q. What does the basin modelling show for generation and migration of oil and gas in the Shaikan area? Volumes and timing of generation? A. GKP hasn’t really done any basin modelling internally. DGA have done it, we have reviewed it. I have to refer you to DGA on that one. That is their body of work. We don’t own that. [The DGA work is very interesting and will be discussed in Part III.] Q. Any comments around the KRG interaction with operators, technical side of things? Are they supportive? A. Other than the fact it is a supportive environment we don’t comment. Q. What evidence do you have that the fracture network is extensive throughout Shaikan given that fracture intensity appears to be much lower in the discovery well in the adjacent Sheikh Adi structure? [They need to be able to indicate to a prospective purchaser that there is unlikely to be any nasty surprises e.g. large parts of the field with none/limited fractures.] A. Sheikh Adi fitted with GKPs model in Shaikan. Once we knew exactly what was happening and the 3D seismic became available we predicted what was happening in Sheikh Adi before the bit got there. It conforms very well is the answer. We knew Sheikh Adi was not going to be as productive as Shaikan on the way down. [An encouraging answer in so far as GKP may now be able to predict the outcome of some wells. However it did not answer the original question - are there any large areas of Shaikan likely not to have fractures. Note it is not that I believe this is the case but I would like to hear GKP say why they believe it will be fractured essentially throughout most if not all of the field.] Q. Was there a problem with that well at some point? Apparently there was a long pause Q. Did you put it on the wrong side of a fault? A. Yes it drilled through a fault and we want to be on the other side. Q. Does that mean you have got to drill a well on the other side? A. Yes that is Sheikh Adi 2. [Nothing new in what was said, however the pause was perhaps significant as not much information has been released about the reservoir properties in the discovery. Was John considering what he could and couldn’t say?] Q. Has there been any evidence to date in the production history that the matrix will not be able to feed the fracture system adequately and sustain the high initial rates seen on tests? A. Firstly we have not seen a single bit of depletion yet from any of our production testing. We have produced intermittently over a period of a year, not a single psi of depletion and that tends to indicate that there might be some contribution from the matrix. If you were just bleeding a fracture system you tend to see depletion quickly. Secondly DST-2 in Shaikan 1, that’s the Mus test, flowed after acidisation about 1,200 bbl/d. The image logs showed no fractures over that interval. We are fairly confident that was pretty much matrix porosity. So certainly there are zones in the reservoir that are tight but there are zones that are porous too. We are fairly confident from that ((DST 2 test=Drill Stem Test)) that the Mus was producing from the matrix. [Very encouraging answer on both counts. Not sure I recollect the Mus being acidized before it was tested with an ESP= ESP - Electric Submersible Pump )). Nevertheless 1200 bbl/d from an interval without fractures, i.e. from the matrix is extremely good. It signifies the matrix permeability in the Mus is more than adequate to support much higher production rates where fractures are present. It also provides some comfort that if there was a large area without fractures wells could still be commercial.] Q. Which fields offer the most appropriate analogues for Shaikan in terms of expected reservoir performance and recovery factors? [A good analogue may indicate potential recovery factor. The problem is these may be in Iran in which case there may not be much published info.] A. No we struggled with this. There aren’t any outcrops of our reservoir rocks within 100km of the field. We have looked at structural analogues in the US. That provides a good structural analogue. Good field analogue? Don’t know couldn’t give you one. Q. Is there one in Iran? A. I must admit I don’t know Iranian fields very well so there may be a good analogue in there but I wouldn’t know it. [Kirkuk may have some similarities as a type III fractured reservoir with relatively good matrix permeability but its oil is much lighter than that of Shaikan and reservoir management practices were poor so its RF is not applicable.] Q. What work have you done to define what would be the most appropriate recovery mechanism for these fields to optimise recovery factor and field economics ? e.g. water drive, gas reinjection, gravity drainage etc. [Recovery factor will be different for each type of recovery mechanism; the difference between each type could be several percentage points up to 10’s of % points. I was concerned that not much work has been done on this although to be fair there are not enough wells drilled yet to finish development of a geological and reservoir model to simulate the field. Some basic work should have been done with the cores samples taken from Sh-1 however.] A. OK a number of things there. We have got a fracture study ongoing that has been running for 8 months and is due to complete early next year. That will define, is defining, the fracture orientation, fracture aperture, whether they are bed bound, whether they are pressure solution things, whether they are through grain fractures. We have lots and lots of information on that now. So we are confident we are going to be able to integrate that with our testing results and define a matrix block size from the fractures. Matrix block size will tell us what type of recovery mechanism we are going to get. If you have got very small matrix block size then things like gravity drainage aren’t an issue. If you have got very big matrix blocks then that does become an issue. The second thing is that our recent core data base we have taken lots of samples, lots of special core analysis (SCAL) ongoing. We are testing things like miscible gas injection. We have got wettability studies ongoing. We have got lots of standard porous plate rel perm work ongoing. So the integration of the SCAL and fracture network study and the sector modelling we are doing in Eclipse will tell us what recovery mechanism is working. We think we have got an active aquifer beneath us. [Great to hear that the fundamental studies required to understand the best way to produce the field are now underway. What everyone needs to understand is that in a fractured carbonate reservoir system we need to find a way of displacing the oil out of the matrix and into the fracture network so it can flow to the wells. In a sandstone reservoir with no fractures, most of the time the best approach is simply to waterflood the reservoir and that will displace a reasonable proportion of the oil from the injectors to the producers. In a fractured carbonate the risk is that the water will simply channel along the fractures leading to very poor displacement of the oil from the matrix where most of the oil is contained. We need to understand how strong a tendency there is for the water to imbibe into the matrix and displace the oil. Hence this is why JS mentioned wettability studies. There is a risk that channelling through the fractures can also happen if a gas injection drive mechanism is used to produce the field. However other effects can also be important with gas reinjection. If the matrix blocks are tall, a pressure differential is set up between the oil column in the block and the gas in the fractures surrounding the matrix block. If the differential is high enough to overcome capillary pressure the oil will drain out of the blocks. Hence JSs comments about determining matrix block size (height). This can lead to high recovery factors but the technique has mainly been applied to better API gravity oils than Shaikan. Moreover I am not sure whether this mechanism can sustain high rates that would be attractive to a bidder. In other words although a high RF might be attainable that may be over period much longer than the PSC term. It will depend on the matrix permeability. So hopefully you can all understand that until this work is completed anybody’s R.F. estimate for Shaikan is pure conjecture and does not carry any authority, mine included! However, the higher the RF, the lower the probability it will be exceeded. Exxon reservoir engineers will have the same questions in mind if they are considering a bid for Shaikan. IMO they will be saying, “Until we know which is the best mechanism to displace the oil from the matrix and into the fractures there is significant uncertainty in RF.” Anyone bidding for a stake in RKHs Sea Lion Field which is a sandstone reservoir with very good analogues is going to be using RF = 35% -5%/+10% with a lot of confidence. Anyone considering bidding for GKP IMO is thinking “This could be as low as 15% and as high as 40-45% but how high can I go and bid with confidence without the basic reservoir information? If my bid is based on 35% RF and it is only 20% that’s 43% less oil, which will show up in profiles within a few years. I’m screwed!”] Q. You think you have actually got an aquifer? A. We think we have; we don’t know is the simple answer? Q. You haven’t actually hit any water because you need water don’t you? A. No it is a real problem. We need water to calibrate the Rw parameter in petrophysics with a real water resistivity. Yes we tested a water zone on Shaikan 2 recently. Quite clearly on logs it looked water wet. We put it on test and it flowed oil! [This is a bit of a revelation. There are two ways to look at this: 1. Wow even the stuff that looks like it should produce water has produced oil. DES in reverse LOL!!! Are there other zones that were not tested that were not regarded as pay that are in fact pay and OMG the OIP should be even bigger ! 2. Wait a minute where was this zone that looked wet and why did it look wet? Was it in the Kurre Chine or the Jurassic? Did it look wet because the porosity much lower than expected? This could lower the OIP in that zone. Did it look wet because the wrong Rw is being used or there was another problem with the log calcs; in which case no problem that can be corrected. This was discussed in the conversation with Ewen. His recollection is that the zone was in the mid or deep parts of the Jurassic. He was at pains to point out that water was not encountered, the zone produced oil. Hence it is not correct to call it a water zone. I am hoping it is the Baluti formation. BBBS and I had a conversation about the Baluti formation at the base of the Butmah in Sh-1. Here is an extract, sorry I don’t have the link to the original post which was in a thread entitled “Importance of More Results From The Butmah” during August 2010. -------------------------------------------------------------------------- “Gram, it really has been good to talk! I've been (slightly) concerned about the high water content in the Baluti ever since the Final DGA Report came out. But I'm becoming ever more of the opinion that the results are a consequence of incorrect CPI calculation assumptions / parameters. The comment in your last post: "Seems odd to me however that they have found a phi = 9% interval with Sw = 47%, yet the interval(s) with phi = 17% have Sw > 60%. Wouldn't you have expected the saturations to be reversed?" is absolutely spot-on and another indication that something is wrong with the CPI = CPI separator - Corrugated plate interceptor calculations. The underlying principle that invariably holds true is that the Bulk Volume of Water, (BVW = PHI x Sw), should remain more or less constant in an oil zone situated well above the OWC. So as porosity PHI increases then water saturation Sw should decrease (and vice versa). The fact that both PHI and Sw are substantially higher in Net Reservoir compared to Net Pay (where BOTH are lower) does point to something not quite right with the Parameters in the CPI calculation model. The lithological column in the DGA Report (Figure 2) shows that the Baluti comprises mostly shale although the boundary with the Butmah above and the Kurre Chine below is not that clear and references in the literature are also uncertain (some classify that Baluti is Triassic rather than Jurassic): http://books.google.no/books?id=LLH8aygMJFwC&pg=PA111&lpg=PA111&dq=baluti+formation&source=bl&ots=Rv-b6_aMwF&sig=-L-VAR0XyirjYg2yCJn6mTAsA6I&hl=no&ei=yXpeTOK-Eo6lcab_7dkO&sa=X&oi=book_result&ct=result&resnum=1&ved=0CBUQ6AEwAA#v=onepage&q=baluti%20formation&f=false Section 9.2.2.2 in the above states that "It comprises 60m of grey green and grey shales with decimetre beds of thin bedded dolomite, silicified, and oolitic limestones, and recrystallisation breccias". A petrophysicist's nightmare! Oolites could certainly explain the very high 'apparent' porosity (ooilites can be visualised as spherical balls of calcite with water trapped inside). And the shale can likewise lead to high 'apparent' porosity and Sw if not properly accounted for in the CPI calculation. DGA have definitely NOT accounted for shale in their Sw calculation because they only used a simplistic Archie model (bullet point 5 on page 17 of the DGA report). The Baluti Formation stands apart from all the others in the Zone Average Table (page 20 DGA Report) not only with regard to very low Net Pay c.f. Net Reservoir but it also has the highest Net/Gross and highest average porosity (by far) over Net Reservoir intervals. I think that all of these things taken together do point to a problem with the CPI calculation. I am not saying that a 'correct' CPI calculation is possible - sometimes things are just too complicated (shale + dolomite + silica + oolites + breccias!) and the only way to a definitive answer is to perforate and see what comes out. So back to my original point, why did they drop the planned DST in the lower Butmah! Regards, BBBS” ------------------------------------------------------------------- Moreover the Baluti anomaly in Sh-1 was discussed with John G in August 2010 and as noted in this post he indicated that it would probably be tested in a future well. http://www.iii.co.uk/investment/detail/?display=discussion&code=cotn%3AGKP.L&threshold=0&it=le&action=detail&id=6762916 It should be possible at some point to confirm with John G whether this unnamed zone in Sh-2 is indeed the Baluti.] Q. How fast do you think the Ber Bahr well will drill? A. I think they will be done by March. That’s my guess Q. Do you think they are in a rush? A. They are getting after it they are not hanging about. Q. What is your understanding of the condition of the export lines to the north via Turkey? Is it realistic to assume that there is sufficient reliable capacity to handle major additions to exports when Afren, GKP and Genel ramp up production? A. There are two pipelines out of Kirkuk. One is out of commission and one is being used. The point from the loading station at Fishkabur out to Ceyhan apparently is in relatively good nick. A lot of the poor maintenance is to the south of the spur where we are. Q. Have there been a couple of incidents recently with that, has there been a leak recently? A. Yes they had a leak and the pressure lowered. There have been a couple of incidents where the federal Iraqi Gov reduced the throughput because of various maintenance and leaks etc. It is operating under capacity at the moment. Q. How far are you on with your pipeline? A. We’ve got a provisional scoping study in place. It is a 120km pipeline and if all goes to plan we will have in place at the end of next year. Q. So everything is planned then? A. The FEED study is out there. We have the design concept underway. It is all out there it is not pie in the sky. There is paperwork to accompany all of this stuff! So a big thank you to Oilman for attending and getting so many of our questions answered. Regards, Gramacho ================

Government pays Iraqi Kurds $427 million as part of deal to solve oil conflict.......

By Khayoun Ahmad

Azzaman, December 12, 2011

The government has transferred $427 to Iraqi Kurds as part of an agreement to settle differences over the development of oil fields, said Finance Minister Rafie al-Essawi.

The sum will be used to cover expenses foreign companies have incurred in the development and production of oil in the Kurdish regime, the minister said.

The Kurds had struck several deals with foreign firms to develop oil fields in within their autonomous region comprising the three provinces of Arbil, Dahouk and Sulaimaniya.

Baghdad had declared the deals void and null and refused to carry oil produced in the Kurdish region in its pipelines for exports.

But the sides eventually came to terms under which the central government will pay what the Kurds say they have spent on their deals as well as the sums foreign firms are entitled to under those deals.

Under the pact revenues from oil exports originating in the Kurdish region will go directly to central government coffers.

The Kurds are entitled to 17% of the hard cash the country earns for its oil exports.


http://www.azzaman.com/english/index.asp?fname=news\2011-12-12\kurd.htm

=================

03:17	Sinopec Again	daeyeon	1
	http://www.reuters.com/article/2011/12/13/sinopec-chinagas-idUSL3E7ND05P20111213 'China Petroleum & Chemical Corp (Sinopec) and ENN Energy Holdings Ltd said on Tuesday that they would offer to acquire all shares in natural gas distributor China Gas Holdings Ltd for up to HK$16.7 billion ($2.15 billion) in cash.' Another CASH deal. 'But speculation that China Gas is a potential M&A target has driven shares of the debt-laden company up sharply in the past few months.' Let's hope a few months of continued speculation pushes GKP on. I can't help thinking that the longer there is no news from AB and BB, the more likely a low-ball offer could be made and 'justified through spin'. Let's say an 800p offer, the potential aquirer could argue that 'the bid is based on xB barrels of oil at $4 per barrel, still no oil law in place, $7B development costs etc so believe the offer is more than fair value....' The more proved up, the harder it will be for a suitor to take us out cheaply and for our board to recommend any low-ball offer to us. =================

UPDATE 2-Sinopec, ENN offer to buy China Gas for $2.2 bln

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Mon Dec 12, 2011 10:09pm EST

* Offer HK$3.5 per share, a 25 pct premium to pvs close

* Sinopec and ENN aim to keep listing of China Gas

* Deal seen positive for China Gas

* China natural gas demand strong (Adds share price reaction, analyst comments)

By Donny Kwok

HONG KONG, Dec 13 (Reuters) - China Petroleum & Chemical Corp (Sinopec) and ENN Energy Holdings are offering up to $2.2 billion cash for control of natural gas distributor China Gas Holdings, aiming to bulk up their presence in the mainland's rapidly growing gas market.

They are offering HK$3.50 per China Gas share, or a 25 percent premium to the previous closing price, Sinopec and ENN said in a joint statement filed with the Hong Kong stock exchange on Tuesday.

Of the HK$16.7 billion total, ENN would finance 55 percent, while Sinopec will take up the rest.

After the deal, both companies will hold a combined 75 percent stake in China Gas. The acquirers said they intend to maintain the listing status of China Gas.

Sinopec and ENN "intend to further collaborate with the China Gas Group with a view to develop their respective China natural gas distribution market," the statement said.

The transaction is consistent with Sinopec's overall business development strategy and Sinopec hopes to expand its supply of natural gas to end users as part of efforts to further integrate its business chain, it said.

For statement click here

Shares of China Gas soared about 22 percent in early trade on Tuesday, while shares of ENN were down minimally. Shares of Sinopec were down more than 1.6 percent in Hong Kong against a 1.3 percent drop in the benchmark Hang Seng Index.

"It is absolutely a good deal for China Gas. With new and well known controlling shareholder Sinopec, its corporate governance will be stronger, and it will help lift investor confidence in the company," said Ben Kwong, Chief operating officer of KGI Asia.

The deal would also create synergy with ENN, which is also a city piped gas distributor in China, Kwong added.

Citigroup is the financial adviser to ENN Energy and Sinopec Corp.

Sinopec currently holds 4.8 percent of China Gas while ENN does not hold a stake in the company.

Other key shareholders of China Gas include SK Holdings Co Ltd, Indian state gas company GAIL India Ltd and Oman Oil Co.

SURGING DEMAND

Like its domestic peers PetroChina and CNOOC , Sinopec has been seeking to expand its natural gas businesses to meet surging Chinese demand.

Sinopec Group, parent of Hong Kong and Shanghai-listed Sinopec Corp, on Monday agreed to increase its stake in the $20 billion Australia Pacific LNG joint venture to 25 percent and to buy more gas from the project.

The venture is just one project in a pipeline worth around $200 billion in Australia that could make the country the world's largest LNG exporter by the end of the decade as it scrambles to feed a growing Asian appetite for gas.

Shares in China Gas had fallen sharply since late last year, when China Gas said Managing and Executive Director Liu Ming Hui and Executive President Huang Yong were detained by police in the southern Chinese city of Shenzhen for suspected "embezzlement of the assets of an organisation in which they have duties".

But shares of the debt-laden company up sharply in the past few months on speculation it is an M&A target. China Gas disclosed last month that it has been approached by a potential investor interested in taking a substantial stake in the company.

Analysts are bullish on China's gas sector, citing increasing industry production volumes and a supportive regulatory policy.

China Gas expects its annual gas sales volume to almost double by 2015 and gas prices to increase, Joint Managing Director Eric Leung told Reuters in an interview in October.

The growth would be driven by the completion of China's new west-to-east natural gas pipeline, gas pipelines linking China with Kazakhstan and Myanmar, and several liquefied natural gas receiving terminals along China's coast, he said. (Editing by Chris Lewis, Charlie Zhu and Muralikumar Anantharaman)

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Should be a + day, GL

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