What do triple-digit oil prices mean for growth?

Re: Where to next?->incorrect renardargente D; I do not think it worth getting into a spat(A brief quarrel) over this but please believe me when I say; I stood outside the Bazian refinery 6 weeks ago and discussed the Kurdish refineries product mix at great length. There are no sophisticated units on this newest of Kurdistan sites. Even the distillation units are simple. The first reforming unit for gasoline production is scheduled for 2012 and I believe this is for KAR Group Erbil - the subject of your quoted reference of 2009. You should note the words '...the refinery WILL make..' in the article. That is not a statement of what the refinery is producing. I am pretty certain that aviation fuel ( kerosene ) is also not yet produced as this has very tight international quality requirements that the Kurdish refineries are unlikely yet be certified to produce - even if they could. Statements made by refinery owners when flanked by politicians and elaborated by the weasel(A person regarded as sneaky or treacherous. ) word 'will' are not to be trusted. The truth is as seen by the naked eyeball and mine reported that gasoline and aviation fuel are not coming out of Kurdish refineries today. The local experts involved in the discussion knew this to be the case. Flatbedshipping estimates: 8 times as much oil as Saudi Arabia 18 times as much oil as Iraq 21 times as much oil as Kuwait 22 times as../.. AlArabiya_Bn مسؤول بوزارة النفط: العراق يؤجل الجولة الرابعة من التراخيص النفطية إلى 11 أبريل المقبل #Iraq #oil @OPECnews @EIAgov@IEA_OECD What do triple-digit oil prices mean for growth? JEFF RUBIN Globe and Mail Blog Posted on Wednesday, January 4, 2012 5:17AM EST 31 comments Email PrintDecrease text sizeIncrease text size Can we still expect to see sustained economic recoveries when oil, the world’s principal source of energy, is trading in triple-digit range? As I argued several years ago in my book, Why Your World Is About To Get A Whole Lot Smaller, triple-digit oil prices will redefine our notion of an economic recovery because as soon as the global economy picks up, oil prices will quickly soar to levels that challenge growth. MORE RELATED TO THIS STORY No way to hold euro zone together Oil price spread costing Canadian producers big bucks Peak oil is about price, not supply Last year was a case in point. In the second full year of recovery from as deep a trough as any seen in the postwar period, oil prices once again rose swiftly to levels that, in the past, torpedoed economic growth. Brent crude, the world oil benchmark, averaged $111 per barrel. This cracked the previous record of an annual average high of $100 in 2008 - a peak subsequently followed by a huge global recession. The North American benchmark, West Texas Intermediate (WTI), rose even more, increasing by 20 per cent from its 2010 average price of $79. Even with the hefty discount that it traded to world oil prices throughout most of last year (at times over $20 per barrel), WTI still averaged just a shade under triple-digit levels at $95/barrel last year. Of course there are always special factors to explain these price levels: the Libyan revolution, Iran’s threat to close the Strait of Hormuz, or an increasingly destabilized Iraq. While all these events certainly pose credible threats to world oil production, they are, at the same time, background noise even if they dominate the front page. The real story behind triple-digit oil prices is not the threat of supply shocks, but the sheer, unrelenting rise in world oil demand. Already closing in on 90 million barrels a day, the quick rebound in world oil consumption to new record highs demonstrates the global economy can’t grow without burning greater amounts of oil. No matter how many rabbits the oil industry can pull out of its hat, be it tar sands from Alberta or shale oil from the Bakkens, supply just can’t seem to keep pace - at least not at the prices most consumers can afford to pay. That is the message that triple digit prices keeps telling us. If the global economic expansion, troubled as it may be, continues, we will see even higher oil prices in 2012. But what does that say about the sustainability of growth? And even if there is growth, what is the pace? ============= Kurds to stay clear of Iraq sectarian strife Link this Share this Digg Email Print Related Topics World » Iraq » Quotes Exxon Mobil Corp XOM.N $85.51 -0.49-0.57% 16:47:45 BST By Jon Hemming ARBIL, Iraq | Wed Jan 4, 2012 4:18pm GMT (Reuters) - Iraq's Kurds are determined not to get dragged into a sectarian conflict over Shi'ite Prime Minister Nuri al-Maliki's attempted arrest of the Sunni vice-president, and the Kurds' leader said failure to implement a federal system would lead to disaster. Nine years after the U.S.-led invasion, much of Iraq is still plagued by Sunni insurgents and Shi'ite militias, but Iraqi Kurdistan has enjoyed relative peace and prosperity after successfully rising up against Saddam Hussein in 1991 and achieving federal autonomy under Iraq's 2005 constitution. Unless their interests are directly affected, the Kurds have tried to remain largely aloof from the interminable political wrangling that has beset the central government in Baghdad, attempting to act as a mediator to resolve potential conflicts. But Vice President Tareq al-Hashemi's flight to Kurdistan last month after an attempt to arrest him on accusations of running death squads has thrust the Kurds centre stage in a political drama that could descend into sectarian violence. "I don't want to be dragged into this," Masoud Barzani, president of the Kurdish region, told Reuters in an interview on Wednesday. "We are not part of the sectarian struggle that is there. Of course we are part of the political disagreement and political struggle, but not of the sectarian one." The Kurds have called for a national conference to settle the differences between Maliki and the cross-sectarian Iraqiya bloc which is boycotting parliament and cabinet meetings, accusing Maliki's Shi'ite-led government of concentrating power. "We are all waiting for the concerned groups to reach an agreement on when and where to meet," Barzani said. Barzani said he was ready to host the conference, but political sources said Maliki was against meeting in the Kurdish capital Arbil and wanted the issue of Hashemi cleared up first. "If they decide to have it somewhere else, then it is up to them, but as far as we are concerned, the venue is not a problem," said Barzani, wearing traditional Kurdish costume of khaki baggy trousers, waistcoat and cummerbund. "I believe many of the concerned groups are not ready to go to Baghdad," he said. As for the fate of Hashemi, "this something that the judicial system and the courts have to decide," Barzani said. "We will not interfere in whatever proceedings the judicial system decides." Hashemi says he is willing to be tried inside the Kurdish zone, and insists a fair trial is not possible in Baghdad. OIL DEAL, FEDERAL SYSTEM The crisis put the Kurds in a precarious, but potentially powerful position as brokers if any political deal can be reached, and, if not, both Maliki and the Iraqiya bloc would need Kurdish backing in parliament to overcome the other side. The Kurds may use this as leverage to win concessions on their own strategic interests, such as control of oil resources and territories disputed between Baghdad and Iraqi Kurdistan. While relatively secure in the mountains of northern Iraq, the Kurds are upset by the Baghdad's failure to resolve the status of Kirkuk, the city at the centre of large oil reserves, which the Kurdish government claims as part of Kurdistan. A referendum set in Article 140 of the constitution for 2007 has still not been held. "We as Kurds we have opted for a voluntary union between Arabs and Kurds and for the system of governance in Iraq to be federal. This is a constitutional right therefore for us and for the people of Iraq, we support a federal system in this country," said Barzani who led Kurdish peshmerga forces fighting Saddam from 1979 after the death of his father who fought Baghdad-rule from the 1940s onwards. "Preventing the implementation of constitutional articles, this will lead the country to face huge problems," he said. "This will bring about disasters." With political wrangling in Baghdad also holding up a long-awaited law on the future exploitation of oil riches, the Kurdistan government has gone ahead and signed a series of its own oil deals, most notably with Exxon Mobil, much to the annoyance of others in the central government. Barzani said there was an agreement with Baghdad that each side could continue signing such contracts until the oil law was passed. The Exxon deal also encompasses areas whose control is disputed by Arbil and Baghdad. "As for places that are called disputed territories by others, for us they are part of the Kurdistan region," said Barzani. "If they have got any disagreement with this then let them come and implement Article 140 as it says in the constitution." (Editing by Louise Ireland) ================================= 09:21 Calm down Hub 18 "Calm down dear"- as one prime minister once said. Rumours come and go - we've had a few. Whilst I understand CJ's insight is valued - things can change fast and these type rumours are often part of the game. We started off with a little test of our interests in GKP with an £8 rumour. The sentiment was no thanks. The water had thus been tested. Now lets try the madding crowd again and see how $19bln sounds? The little test seems to have gotten a positive test from the BB. Not one complaint thus far as I can see. It's all part of learning where to pitch the offer and be sure you will succeed. As the chances are - you'll only get one stab at it. As for the more 'firm' behind the scenes banter - TK and co will be keen to see Exxons bid of £8 per share rise. A rumour of £14 per share will have them worried. They know GKP has plenty of interest. Do not underestimate the BB's value. There's no better gauge to sentiment and interest than these BB's. That's why the trolls spend so much time on here and no where else. Desperate and fighting a losing battle - they continue like headless chickens. Now things can change fast. Hence if £14 does not materialise CJ and anyone else backing the deal / rumour up can merely hide behind the 'something changed', something unknown appeared and thus the offer was altered blah blah blah. It's all very well making offers - but due diligence takes months. Imagine that monday brings an rns that says £14 yet it is subject to due diligence and offers can be revoked etc etc. It's still great news but imagine if the offer gets pulled after 1 month? Not a nice thought is it. So before you get too excited - just keep things in balance. It will take time to get any offer finalised but the most important part is to get the informal agreement done on price. Then the proper system of checks can be put in place before a formal offer is made etc. Whilst the filled to spill theory is very much alive - there is not enough data out there to 100% prove it. BB-1 result is not even in yet never mind further exploration. It took GKP 3 x wells before they could get Shaikan up to 4.9bln. And 4 wells before they moved to 8bln. I don't doubt CJ's info but I know from experience that 'things change' on a daily basis. In the UK - you can make a million pound offer for a 100k house - that's up to you. But there's nothing to stop me pulling out after i've done a survey. We are at the business end of GKP's assets now and the newsflow is about to get thick and fast. If someone wants to get in there early with an offer, good stuff - but they want results to follow to validate the forward looking story. Enjoy the weekend and don't count the chickens just yet. HUB ============ 09:06 60 Billion plus Oil Field, @ £14 p... ChapinAfrica 30 It was BBBS legendary post which first muted that GKPs 4 assets combined could contain upto a 60 Billion Barrels,............wow!!!!,....and there was a sharp intake of breath,.......and then the Blue Sky thinking. Then there was GRH's wonder pictures from outer space which certainly shone the spotlight firmly on GKPs assets and their outrageous size,.......do you think any Oil company had these pictures before GRH unleashed them upon the internet,...hmmmmmmm not so sure. No OWC to date,........unbelievable!.....yet we have a confirmed 2350m of confirmed pay zones being tested as we debate,........ and still No OWC,.........just far down does the Oil go? I am begining to think,...... be it,... Exxon / Chevron / Sinopec /Total / ENI / Conoco or any combination of the above,.....they would much rather we do not know the answer. TK is holding the Royal Flush,......and Exxon or A others want to buy that Royal flush. O&G Law,..please, ....nobody gives a damn about that at the moment,......except the city analysts, who are using it as an excuse to downgrade us while the IIs and HNWI load up,!!!! The Kurds have Politically boxed like undeafeted world champions,....M&S are being beaten to a pulp it is so one sided it is embarrassing. Its all about the Billions of Barrels of Oil,.......25 years of 400,000 - 1,000,000 Barrels being pumped per day from Kurdistan, in the not so distant future. Do you honestly think M&S will still be in power when this day arrives? Do you think the Kurds or Exxon do? Its all about money,.....and how much somebody thinks GKP's Royal Flush is worth to them! GKP is breaking records daily now,....£14 per share,...another record,...for what the whole of the company or just Shaikan,? 2350m of Pay!!!!!!!! No OWC. The figures are so big it is mind numbing...................... I do not expect fireworks soon,...but i do expect quiet a few days of steady rises in the SP,...and records being broken, it will make that £14 start to look smaller. Its all abour Perspective and from which angle you view the beauty of GKP. Have a Great Weekend All, Regards, CiA ============= Author zengas View Profile Add to favourites Ignore Date posted today 01:10 Subject Why bids might now surface. Votes for this Posting Voted 33 times. Message It amazes me sometimes that people always doubt the possibility of a potential bid being tabled and totally dismiss it just because GKP said it was not in discussions for a sale of the company. A member (ad-v-f-n) here posted at the time of that denial an example where another company denied it was in bid talks and then within 2 weeks announced it had received a bid (can't recall who it was but it was posted here - a very clear example of how things go on in the background). Also - Cove announced on the 13th Dec it planned to sell an interest in it's Ruvuma assets. It wasn't in talks ! Cove announce on 5th Jan it has put the entire company up for sale (It's assets have just gotten too big without causing serious dilution to take them forward/timeline development) and states - "The Board shall then discuss certain of these proposals with one or more relevant parties with a view to agreeing an offer with one party which it is able to recommend to shareholders" - this still says it it not in bid talks because as yet no bid has been made. - Therefore the same could apply to GKP imo. Executives might say we think we can offer $XYZ , how would that sound ? ...A verbal informal discussion on possible strategies even with potential suitors across a table is a lot different from a bid recieved in writing! GKP said they intended to sell an asset (Akri-Bijeel) 12 weeks ago. It's likely that potential buyers will have looked at this and indeed sounded out the chance of buying the company as a whole and how much it might take. For heavens sake GKP are at a critical juncture and imo will need to start working on securing capital/debt or whatever to drive the development forward and decisions will have to be weighed up regarding their best option. If normal rational investors can see the need for future serious funding, then so can potential bidders for the company. Further dilution/debt might well surpress the true value of the shares for up to 2 years if GKP go it alone. If significant value can be realised ahead of time now on 900m fully diluted shares it might be the best option rather than possibly 1200m shares + debt and waiting up to 2+ years before some development is completed. The earliest 440k bopd plan is 2020 and GKPSs John Gerstenlauer in the last few weeks said they thought they could bring it forward to 2017 - thats 5 years still and even at a reduced production rate of 100k bopd it will take most of that capital throw off to be reinvested to bring it up to the 440k bopd level. Another factor is if the OIP figure increases as it has been doing there's no way GKP can go it alone to say change that to a 750k - 1m bopd producing field to take full benefit of the commerciality terms. Even Bobobob said (and i beleive it's possible too) Shaikan is getting too big for GKP. No bad thing for GKP but all these things add imo most significantly and lend weight to the various posts from those connected and press rumours. It's all well and good saying i won't sell until 2000p+ but it's no material benefit if we have to increase significantly our shares in issue/debt (some $3.7b needed just for GKPs Shaikans share on 440k bopd - you can see the caveats/discount risk funding for a company solely tied up in Kurdistan alone to take such a huge project through to development by 2015/2017. The KRG may want to get this field up to 750k bopd with its higher OIP - something that i feel that GKP won't be up for - ie higher debt/funding increase perhaps $5b+. The above are all important factors alone as to why bid talk has actually surfaced now when you take into consideration the situation GKP finds itself + KRG wants and needs! Imo this shows the serious nature in deciding the way forward/GKP already likely discussing it's options and why bid rumours/press etc has surfaced because so many options are being discussed - imo its no coincidence that rumours of offers being mooted or table are surfacing from various sources. Let's face it, GKP even show a 2 track development stage in their presentation - one for a company such as themselves and one for a major - what's that tell you if you can't take it onboard !!! It's a for sale sign if ever there was one imo). 1000p-1400p now if it materialises, may be no better than 1800p - 2000p a few years down the road if we have a lot more shares in issue + debt and have to wait until 2015 until first serious pipeline production kicks-in. It's not too many weeks ago that JG reckoned they'd end up being bought. The fields gotten too big imo for a company such as GKP to develop it in a reasonable timescale to totally benefit from it - imo it's over to the highest bid amonst all interested parties of which i'm sure there'll be a few. It will be interesting to see how Cove do in their similar situation in the next few weeks! ================================ 14-12-11 Re: JG Interview GKP.L 76 Is this the first mention of 3D at Ber Bahr. I don't see it in any presentations. "Money will also be spent on drilling a second well at the Sheikh Adi Block and to acquire 3D seismic at Ber Bahr." The 3D will be around $25MM. Sounds like John is hinting that BB has come good! I expect TK/JG to continue to keep us up to date with BB-1 if Genel is tardy. They did the same at Bijeel-1 pointing out its significance re the regional aquifer. 23-12-11 Re: Out for a bit (not me) BPC.L 14 bakueagle, I have a very large investment in GKP and a not in substantial one in BPC. The remote sensing technology is a fascinating complementary technology to the explorationist’s toolbox. It has helped bring further attention to GKP. But that technology is not a reason to invest in GKP. The drilling successes and an early hint from management on its current exploration well are the reasons to do so. The real benefit of this technology to investors will be in finding companies who are using it prior to drilling their first exploration well in an area or perhaps on a second prospect nearby an existing discovery which can provide confidence in the satellite images. GKP have already had three announced discoveries and hopefully a fourth at Bekhme which has been testing forever. The biggest beneficiary could be someone like PCI if they were to persuade Hess to use it to help prioritise where to drill in their Kurdistan acreage or if their Italian land acreage is suitable. As for BPC, it is frustrating to endure this prolonged slide but is now the time to sell? ( FWIW=For What It's Worth) my limited sales have been in the 14-23p range. I would be loath to sell any in the current price range given the quality of its portfolio. You seem to be vacillating between GKP and BPC based on your current BPC post and a review of your GKP posts in November. Why did I look at those? Because when anyone uses the terms Appraise, Select, Define, Execute I know they probably have a good background. Author Gramacho View Profile Add to favourites Ignore Date posted Friday 09:22 Subject Re: Walking With Giants - COS etc View parent message Votes for this Posting Voted 18 times. Message It is great to finally see some discussion on BORs pros and cons and particularly to see marlon, llivic1971, GCTrader et al taking part. In discussing the CoS=Chance of Success marlon drew the analogy with Sea Lion and pointed out that it was within 1km of a well with live oil shows. Sea Lion and Ernest both had the same CoS of 23% at the time of the RPS CPR. Ernest was about 115km from the 14/10-1 well that had live oil which I believe marlon was referring to. Also it was known that the Cretaceous source of the live oil should be immature at Ernest. It was just over 60 km from the nearest well 14/24-1 which had oil stains but which was at the limits of maturity of the Cretaceous source rock. Ernest was defined by about ten 2D lines with a line spacing of 2km. Although it was said to be a robust 4 way structure it was bisected by a fault with around 50m throw. It had an inconsistent and therefore unconvincing AVO anomaly and there was no attempt on RPSs part to say there was conformance with structure. Yet it was attributed a 23% CoS the same as Sea Lion at that time even though there was only a 35% chance of it being sourced. Now compare with BORs Darwin prospect for example. It is 75-80km from a well (Toroa) with good or excellent sands at two levels within the Cretaceous. Unlike Ernest it is in a basin that has a marine setting where there is potential for widespread distribution of a source rock. There is reason to expect a mature source rock based on information from the DSDP wells and also Toroa, although the distance and uncertainties in heat flow modelling would still leave uncertainty. However there is very strong evidence of a hydrocarbon charge entering the structure on the basis of a compelling flat spot visible over a significant area and on all lines within that area. The flat spot has really good conformance with structure. IMO this mitigates the source risk that was the major constraint to Ernest not having a higher CoS. It puts Darwin in a different league to other prospects from that perspective. It is described as tilted fault block but it did not look dissimilar to the northern part of Ernest (rotated 180 deg). Structural definition should be much better. What is the typical line spacing on 3D seismic, 12.5 - 25m? BORs prospects benefit from thousands of 3D lines within every 2km x 2km grid in which the Ernest prospect would have none! This huge density of information enables far more confidence to be placed in its seismic attributes than those of Ernest. If Ernest was 23% CoS then Darwin (if evaluated on the same basis as RPS) has to be much higher. I have asked BOR what they are carrying for a CoS but they will not release the number. Let’s look at the CoS components for Ernest: Trap Definition = 0.9 Source/Charge = 0.35 Seal = 0.9 Reservoir = 0.8 CoS = 0.9 x 0.35 x 0.9 x 0.8 = 0.23 i.e. 23% How does Darwin compare? Here is how I view it. 1. If it did NOT have a Flat Spot Trap Definition = 1.0 (High quality 3D) Source/Charge = 0.6 (Marine source rock and AVO response suggests charge) Seal = 0.7 (Lower than Ernest due to risk of fault reactivation) Reservoir = 0.8 (Strong amplitude response and horizons correlate with Toroa) Chance of finding hydrocarbons = 0.34 However there is a risk that the source is over mature and may have entered the gas window in this part of the BOR acreage so a product risk should be introduced. Right product (oil or oil and gas) = 0.7 (BOR models as oil but potential for heat flow modelling error) Chance of finding oil = 0.34 x 0.7 = 0.24 i.e. 24% 2. With Flat Spot and Conformance with Structure Trap Definition = 1.0 (flat spot confirms 3D trap definition) Source/Charge = 1.0 (flat spot proof of charge) Seal = 0.7 (reactivation still possible and flat spot could be a paleo contact) Reservoir = 1.0 (flat spot is proof of reservoir and a thick one) Chance of finding hydrocarbons = 0.7 Right product (oil or oil and gas) = 0.7 (Potential for error modelling heat flow remains) Chance of finding oil = 0.49 i.e. 49% Why seal =0.7? Because my understanding is the fault does not extend a long way above the top of the reservoir and beyond the thickness of the overlying seal. As BOR said you can always find a reason why a prospect might fail. Why right product = 0.7? The almost mature source rock at Toroa fits the basin maturity modelling study and was as predicted. The gas prone area of BORs acreage is to the south of Darwin. However there is still a chance that some gas may have reached the structure. This is a very high COS for a wildcat 75km from the nearest well but that is how I see it. Prospects like Darwin are rare, very rare. Off to the gym now but interested in reading your thoughts on COS marlon when I get back. Why, given the very high quality seismic attributes, do you think the COS is only 15% or about 1 in 7? Is it purely based on distance from the nearest well? Ernest was a 1 in 4 and not in the same league as Darwin. I have gone into more detail on BORs prospects and can put the information provided in thesharehub articles on one post here for convenience. = Author Gramacho View Profile Add to favourites Ignore Date posted Friday 23:52 Subject Re: WWGiants - COS/Discovery SP etc View parent message Votes for this Posting Voted 15 times. Message DARWIN COS marlon, just as you think I am being massively generous in the non flat spot case, I think you are being very conservative lol! The non flat spot numbers are a bit academic, for me at least because as far as Darwin is concerned clearly I have bought in to the flat spot having seen it firsthand. But in response to your points ... Because Darwin is a very well defined structural trap on 3D it should carry a higher COS than the 0.9 of Earnest particularly as the top structure amplitudes were strong. Of course if it had a stratigraphic element or if the top structure amplitudes were not so clear then yes it would be lower, much lower if it were a combination trap even with 3D. As regards source, we shouldn’t forget the hydrates in the shallow section immediately above Stebbing. These are a strong indicator that the source has generated hydrocarbons. As I pointed out in my “three parter” these are found above every oil discovery in some of the DW Angola acreage. At their closest Darwin and Stebbing are about 25 – 30km apart and are roughly equidistant from Toroa. So from this perspective Darwin isn’t so remote from evidence of the source as Toroa would suggest. So there is source to the west in the Malvinas, evidence of source east south east at Stebbing, source at the DSP wells to the Nth East and in Toroa to the NNE. FOGL said Toroa had “encouraging, albeit slightly ambiguous seismic amplitude and AVO (amplitude versus offset) responses”. But the key here is that there were no structural constraints on the AVO and amplitudes. The trap wasn’t well defined so there was, unlike Darwin, no cross check “Does the anomaly conform to structure?” In Darwin’s case it does conform, in Toroa’s case it was impossible to say as it was a poorly defined strat trap. Reservoir - you could argue the case for a lower COS I wouldn’t dispute that but I was being consistent with RPSs treatment of Ernest. SP IN THE EVENT OF A DISCOVERY marlon I understand why it is natural to quote the RKH scenario in which it was possible to buy in after the event and still enjoy a lot of upside. I did that as I had not gotten around to examining RKH prior to the result. I was lucky to be on the laptop in the middle of the day and spent a frantic 45 mins digging out the relevant info. But what did RKH first announce? Here is the RNS: “Sea Lion Exploration Well - 14/10-2 Oil Discovery Rockhopper Exploration, the North Falkland Basin oil and gas exploration company, is pleased to announce that well 14/10-2 on the Sea Lion prospect has reached a depth of 2,744 metres. Initial data collected indicate that this well is an oil discovery, which would be the first in the North Falkland Basin. The Company has run a suite of wireline logs and logging data collected thus far indicate that the well has encountered a 150 metre gross interval of sand and shales. The data show that the well has 53 metres of net pay distributed in multiple pay zones, the thickest of which has a net pay of 25 metres. These pay zones have an average porosity of 19%. Rockhopper now intends to collect additional logging information prior to making a decision whether to plug and abandon the well, or to suspend the well for future testing. The Company is also considering whether to drill an appraisal well on Sea Lion later during the current drilling campaign. Further information will be distributed in due course.” The RNS said there was a decent amount of pay with a fair to good porosity, no mention of water saturation, no mention of API as it had not been sampled, no mention of permeability indications and no reference to how this compared with pre-drill expectations. It was no wonder there was initially a measured response to the news. The market was not at all confident what the implications for value were. Since then we have had the DES “oil to water” debacle and in Darwin we have the possibility of gas sitting on top of oil. So I don’t think we will see an early RNS with preliminary log results. I believe BOR will run MDTs,((MDT - Modular formation Dynamic Tester )) measure fluid gradients to confirm whether they are gas/oil/water legs, collect samples, get MDT permeabilities and only then release an RNS. Hence I believe there won’t be quite the same opportunity as was provided by RKHs first RNS. Assuming success there are a number of facets to the RNS that will influence the initial SP response: • How comprehensive it will be • Just how good the results are and how much guidance/context they provide • Whether they make plain the implications for Stebbing • Whether they will release it at 7 a.m. or intraday If it is comprehensive, is a clearly unambiguous result and a really good one at that and it is released at 7:00am then I think this will suit investors who have taken the pre-drill risk as I think the SP will gap up big time. Two important constraints to the SP are: 1) The current market valuation of appraised reserves in $/bbl at Sea Lion. I am using $2.8/bbl based on the current SP, current RKH guidance STOOIP of 1297 mm bbl and a 35% RF. and 2) What the market believes newly discovered resources are worth taking into account that funds are required for appraisal and that this will lead to dilution. IIs will only be attracted to a placement if they believe the price leaves headroom for growth due to maturing the resources (constraint 1) and if the sp at the placing price does not infer an unduly high $/bbl for the mean (or some may prefer P50) resource estimate. In a rational market in which everyone has the same view the discovered resources and dilution requirements the price should settle to a value that will enable constraints 1) and 2) to be met. However in the excitement following a major discovery the market may not behave rationally. The other complicating factor with BOR is that the second prospect, Stebbing, is larger than the first. Success at Darwin will substantially increase the COS at Stebbing due to its impact on Stebbing source and product risk so the value built into the SP for Stebbing becomes a bigger number. (Note BOR says they are independent except for source when discussing the failure case but I think product risk (a sub element of source risk) is a factor in the success case) My estimate, and I could easily be wrong, is that in the event of a good success at Darwin the price should settle between 120 - 150p until the results of Stebbing are known 2 months later. I have no idea however whether the price coming out of auction will be below, within or above this range! It will depend on the RNS and the excitement/enthusiasm it creates. The estimate assumes the market will value newly discovered resources at $1.5/bbl, makes an allowance for Stebbing and assumes an eye is kept on substantial funds having to be raised for appraisal. Within this price range there is room for sp growth during appraisal taking into account a placement, even without an increase in resources and whilst being constrained to $2.8/bbl at completion of appraisal. If there is ambiguity or the result is seen as less than a good succes then we won't see this price range. I agree that making money by taking exploration risk is difficult in this market. Post the 14/10-2 Sea Lion discovery its resources were valued between $4 – 5/bbl, now we are trying to make it work at about $1.5/bbl. Regards, GLA Gramacho ============= Schlumberger Have built a nice new operating base in Erbil A move from the south YES Been working on GKP's well testing YES Are they in anyway concerned with getting banned from the south NO do you anticipate being busy VERY Just a little chat I had with Schlumberger at the SPE conference I myself am not concerned with what the ICG are saying Just off to B&Q to buy a wheelbarrow before they sell out All the best Oilman63 === 12:58 Re: Sh-4 Sclumberger testing Fruit n Veg 10 PJM4GKP This fine and quite prophetic piece by Ed Vinales has been doing the rounds since June, no less! Vinales is very well plugged in. So, actually, I am glad you reposted it because it is required reading for anyone wishing to understand what these big oilies are about. They will quite simply say anything which suits their agenda. Clearly Exxon was already at an advanced stage in discussions with the KRG in June. Yet Vinales says: "Exxon and Shell, both heavily involved in central Iraq, declined to comment on “speculation and rumour” of their potential interest in Kurdistan..." To describe a report as 'speculation and rumour' is... yes, you guessed it, another form of 'non-denial denial'. Don't get me wrong. I would have said the same if I had been speaking for Exxon - their PR people are only doing their job. But it does demonstrate that corporate statements MUST be treated with an enormous dollop of scepticism and that those non-denial denials in particular are very significant. ============== 14:01 Re: Sh-4 & Schlumberger pj66 9 These boys at Schlumberger have to close ties to Exxon for years and thier current CEO started his career at , you've guessed it ... Exxon in 1992 To have the worlds leading oilfield services provider sniffing around our blocks with there 'pals' i'll take that as a massive plus. also relaesed this week . ... Petrofac Teams up with Schlumberger for Big Projects Source: Reuters 1/5/2012, Location: Middle East British energy services firm Petrofac said it will team up with Schlumberger, the world's largest oilfield services company, to enable it to bid for bigger projects with national oil companies and other firms. The two companies said that they had signed a co-operation agreement which will let them work together on projects to help resource holders such as national oil companies develop and enhance production from their oil and gas fields. "The creation of this framework will enable us to bid jointly for projects of a scale that we would not pursue independently, and to develop them at a much faster pace," Andy Inglis, head of Petrofac's Integrated Energy Services (IES) division said. Petrofac said last year that it aimed to double its 2010 earnings by 2015 through building up its IES business which provides services to help develop oil reserves. The two companies said they believe a significant opportunity exists to win business from major resource holders which want to develop low-risk reserves. Such holders tend to be national oil companies who lack the expertise to boost production themselves but don't want to give up the title to reserves, which they would have to do if they teamed up with a traditional oil firm. Petrofac became the first foreign company to operate fields in Mexico for 70 years when it won a contract there in August, and has also set its sights on winning business in Iraq and Turkmenistan. Shares in Petrofac closed at 1,465 pence on Wednesday, valuing the firm at 5.1 billion pounds. ================== Author PJM4GKP View Profile Add to favourites Ignore Date posted today 12:38 Subject Sh-4 Sclumberger testing Votes for this Posting Voted 37 times. Message Not sure if posted but it is Sunday reading for you....GKP get a wee mention as well. Now why have Schlumberger decided to work in Kurd after they said they would not, is it at GKP's, Exxon's request with ICG approval.... SH-4 is muted as being a monster Gross pay wise.... http://ikjnews.com/?p=878 By Ed Vinales-Several of the oil industry’s biggest players are looking to make their first foray into Kurdistan Iraq suggesting they have become less wary of reprisals from Baghdad, according to dealReporter. However, their interest may actually be due to Iraq’s need to increase oil revenues rather than further indication tensions between the two regions are easing. Although the oil majors have never publicly said so it is widely accepted they have previously avoided Kurdistan for fear of losing business handed out by Iraq’s central government, which controls access to the vast majority of the country’s 143bn barrels of proven oil reserves. Schlumberger [SLB US] and Halliburton [HAL US], the two largest oil field services firms globally, may shortly follow smaller rivals Weatherford and Baker Hughes by becoming active in Kurdistan, according to local sources. There is increased talk Exxon Mobil [XOM US], Royal Dutch Shell [RDSA LN] and TNK-BP [TNBP RU] are also looking at opportunities in the region. When asked about its involvement with Kurdistan, Halliburton said its “geographical footprint is primarily driven by its customers’ activity. As a global oilfield services provider we are fully committed to supporting customers in areas that make prudent business sense.” Schlumberger, which entered central Iraq last year, said increasing its activity in Iraq would be governed by contract gains and security assurance. In 2006 the group brought back former employees who had been active in Iraq prior to the first Gulf War to re-establish contacts with Iraqi officials. Security not a problem in ‘top travel’ destination A country manager at a Kurdistan focused oil company received a call from two senior Schlumberger people in 2008 who wanted to talk about Kurdistan. “They claimed the security situation was why they were not yet operating in the region and I hadn’t heard from them again until another call two months ago. But the company is active here now,” he said believing the real reason for the delayed entry related to concerns it would be blacklisted from operating in the south. Exxon and Shell, both heavily involved in central Iraq, declined to comment on “speculation and rumour” of their potential interest in Kurdistan although Russia focused TNK-BP said it is assessing possibilities in the Middle East. Having now gained a foothold in the south, Schlumberger and other oil groups would be hard pressed to maintain security issues as the reason they are not interested in Kurdistan, which has tens of billions of barrels of proven or potential oil reserves. National Geographic cited the region as one of its top 20 travel destinations this year and the US, UK and French governments all currently state the security risk in the region is far below the remainder of Iraq. Regardless, Baghdad’s blacklist threat has so far held the biggest players at bay. Several companies, such as Korea National Oil Corporation, reportedly signed deals with the KRG and subsequently had export contracts in the south of the country cancelled. Furthermore, no oil company currently active in the north managed to both qualify and win oil service contracts during central Iraq’s long awaited 2009 and 2010 oil field auctions. China’s Sinopec and Marathon Oil both initially qualified for the auctions but subsequently entered Kurdistan and have no presence south of the Kurdistan border. Sinopec acquired its interest in Kurdistan’s producing Taq Taq field when it bought Addax Petroleum in a deal that drew the wrath of Hussain al-Shahristani, Iraq’s former Oil Minister. Meanwhile, Marathon acquired several blocks in Kurdistan last year despite the US government advising against the deal in the absence of clearance from Baghdad. Any company that signs contracts with the KRG without approval from central government will compromise chances of getting future opportunities in Iraq, al-Shahristani repeatedly stated in the run up to the licensing rounds. Now Deputy Prime Minister for Energy Affairs, al-Shahristani continues to be a key political player in Iraq and one of the main obstacles to Kurdistan’s oil contracts being officially recognised in Baghdad, which feels the KRG contracts give too much away to the oil companies. Baghdad and Irbil pointing in same direction A source at a technical consultancy active in Iraq said: “The Iraqi oil ministry’s comments seem to have been enough for all the oil majors and one or two of the larger oilfield services firms to take a step back from entering Kurdistan.” Prior to becoming the first oil major to win a contract in the south, BP reportedly refused to allow TNK-BP to invest in Kurdistan after taking advice from the US government. TNK-BP’s Russian shareholders ultimately invested in the region through their own independent venture Norbest.

Baroness Nicholson of Winterbourne, chairman of the Iraq Britain Business Council, which counts Exxon and Shell amongst its membership, said “Regional differences need to be resolved at both a political and parliamentary level before contracts [in Kurdistan] can be taken up.” Iraq has for years failed to agree upon and put into the legislate its draft hydrocarbon law. However, the formation last year of a KRG-Baghdad government, in which the Kurdish parties agreed to support Nuri al-Maliki’s re-nomination as Iraq’s prime minister, signals that both power centres are starting to point in the same direction, said Nicholson. Although there has been no official comment to support this view it appears restrictions on companies operating in both regions are reducing, added the source at the technical consultancy.

Further evidence tensions between the two regions are lessening came in May when Baghdad followed up an earlier order for Kurdistan to start oil exports by agreeing to pay the region’s oil producers for their costs. Whilst the payment is the clearest signal yet that the government is set to recognise the KRG’s production sharing contracts it may only do so on a case by case basis to save face, said Zaineb Al-Assam head of MENA forecasting at Exclusive Analysis. Prime Minister al Maliki said the triggering of the oil payments mechanism signifies the commitment to resolve the outstanding issues between Erbil and Baghdad and will add impetus to discussions over a long-delayed raft of federal oil and gas related legislation. Government cash flows hit as majors’ reach initial targets However, it is not clear whether the payment that took place in early May corresponds to the terms of the production sharing agreements signed between the KRG and the foreign operators, said Al-Assam. The May payment is also considered by some as part of Baghdad’s political strategy and falls short of establishing a legal framework towards this end, she added. It will be important to see whether the payment continues in the months ahead, continued Al-Assam. Al-Assam also noted that Baghdad may need the KRG’s exports to keep the country’s 2011 budget in balance. Baghdad, which had targeted 2.4m bopd production for 2011, produced just over 2m bopd last month. The KRG has said it hopes to achieve around 200,000 bopd production by end of 2011. The entire country’s oil exports account for more than 90% of its revenue all of which flows to the central government, which then redistributes 17% of the national budget to Kurdistan. Based on the numbers it is in the KRG’s clear financial interest to ramp up its production especially as the halting of domestic sales prior to the start of exports will have reduced the amount of oil smuggled by truck into Iran. This was allegedly a good source of income for the KRG and was well documented right up until last summer despite its claims it was cracking down on the problem. The KRG has publicly denied oil has been smuggled into Iran or that it profited from it. Financial necessity could indeed be behind Baghdad’s decision to order Kurdistan to resume oil exports, said an oil and gas banker covering the region. “Oil majors are hitting the initial thresholds demanded by their oil service contracts and starting to bill the government for their costs,” said the banker. In March Exxon and Shell announced they had hit a service contract target for a 10% increase in production for the West Qurna Oil field, the world’s second largest. Baghdad is unable to counter the drag on its cash flows by increasing oil exports from central Iraq as the water infrastructure needed to boost production is severely lacking, added the banker. Central Iraq remains at least six to nine months from seeing an increase in the “incidence of engineering procurement contracts” as the IOCs need more time to better understand how to achieve the plateau production targets set by Baghdad, the technical consultancy source said. Baghdad may be playing long game Furthermore, the central government recently confirmed what has been long been known by the industry that its expected oil production plateau targets are going to be closer to half the original target of 12m bopd by 2017 and therefore run for twice as long. As a result of the financial pressures it seems quite possible that Baghdad has asked Exxon and the other oil groups to move into Kurdistan to help accelerate the region’s oil productivity and pipeline infrastructure development, said the banker. Kurdistan’s main two oil producing companies Sinopec and DNO [DNO NO] are shortly to be supported by Gulf Keystone Petroleum [GKP LN] as the region attempts to achieve production targets of 1m bopd in 2014 set by Ashti Hawrami the KRG’s oil minister. “By asking oil groups with contracts in the south to move into Kurdistan, Baghdad will have some leverage over these companies and therefore the region in the future,” speculated the banker. At the moment the KRG has a window of opportunity to press its various oil, land and power disputes with Baghdad as it knows its oil is important to developing central Iraq’s infrastructure. But in two years or so when the infrastructure in the south is further developed the relationship may change, added the banker. It is in the global economy’s interest to see the current accord between Baghdad and Irbil, Kurdistan’s capital, maintained especially in light of OPEC’s recent shock failure to agree on an increase in oil production that would have lowered crude prices. Analysts at JP Morgan last week said Iraq will be “critical” to OPEC’s incremental supplies of crude through next year.(merermarket) =================== Author scaramouche View Profile Add to favourites Ignore Date posted Saturday 16:43 Subject A FAIR amount.... Votes for this Posting Voted 176 times. Message Great to see everyone so excited, albeit based on a fair amount of speculation – it really does appear though that the finishing line is in sight! I would like to add my voice to the faith that many posters have shown in CJ and the quality of the information he provides. I believe he has that rare quality amongst BB posters of complete integrity and belief in what he says, which is not always positive about TK, GKP or the KRG I can assure you! So, if he says something important, I would certainly be inclined to sit up and take notice. I will however only believe it when I see it, as there is no guarante9e! Anyway, just before people get too euphoric (miserable) , i would like to make a couple of points... In a number of my recent posts, I have drawn attention to how the OIP figures are LIKELY to rise sharply over the coming months. At present ,we have 10.5 billion for Shaikan, 1.9 billion for Sheikh Adi, and 2.4 billion for Akri Bijeel on a P50 basis. The Net Working Interest we have in each block therefore gives us 5.7 billion + 1.5 billion + 0.3 billion respectively… an overall total of 7.5 BILLION barrels attributable to GKP (or 2.25 BILLION of RESERVES based on an estimated 30% Recovery factor). This sounds absolutely massive and of course it is.... but we may be very close to hearing that the figures are actually much larger than that IMHO! The present figure takes little or no account of the likely additional OIP upgrade arising from the ongoing testing of SH-4 (with its 2375 m of gross pay), nor does it include anything from Ber Bahr which is believed to be 1.5 times the size of Shaikan. And it takes no account at all of the OWC level which many believe will be identified by Shaikan-6, proving the ‘full to spill’ theory; or the 'connection' between Shaikan, Sheikh Adi and Ber Bahr which could also be revealed in only a few months time. And it certainly includes almost nothing for the presence of the often talked about ‘regional aquifer’, which might demonstrate once and for all the 100 BILLION barrel potential that BBBS was alluding to in, believe it or not, JANUARY 2010, and that GRH1 made reference to in his stunning recent post about the satellite technology he is familiar with. Remember those extraordinary images, and the fact that there are actually much more detailed ones in existence! So, while we are all undoubtedly almost incredulous at the thought that a $19 Billion offer could soon be on the table , when we have so far proved up only 2.25 BILLION RESERVES, I do think we need to think very carefully about whether this would sound quite so good if the overall RESERVES attributable to GKP’s blocks was actually 5 BILLION now.... and could even be close to 10 BILLION not so many months away. My suspicions are that we are very close to seeing the current OIP figures DOUBLE, and reserves figures in the region of 5 BILLION. $19 billion for 2.25 BILLION reserves would be brilliant... but maybe not quite so good if we knew that it represented just $3.80 per barrel on 5 BILLION reserves... while whoever buys GKP would get $4 per barrel in addition AND have Ber Bahr almost thrown in for free! No, I am certainly not under-estimating the sheer magnitude of a bid amounting to nearly £14 per share while the SP is currently only £2. It would be wonderful and life-changing for me and many others on this board. TK would probably describe it as “transformational”! However, I think that, in spite the enormity of the figures involved, we really do need to 'wait and see' what the alleged $19 billion is actually based on, and whether it is straight cash or a mixture of cash and shares, considerations which will undoubtedly affect our thoughts.... and those of the tax man! George Osborne would undoubtedly be licking his lips too. My feeling then is that, IF we are indeed about to hear of such a bid, we should give it very careful attention indeed before signing on the dotted line, as it is the finer detail that will undoubtedly be the most important of all! Think of it this way – if you picked up an old vase in a car boot sale for £200, and some rich American then almost immediately offered you £1400 for it, you would probably be absolutely delighted and shake hands without a moment’s notice. BUT if, about six months later, you saw the very same vase on sale in the local antique dealer’s shop with a price tag of £2500, imagine how you would feel then! Perhaps that particular vase would have lost something of its shine! IMO, you should therefore always be cautious and questioning, rather than accept the very first offer you receive - because if someone wants it badly enough, they are almost guaranteed to pay a fair amount more. And, after all, isn’t that all we are really after .... A ‘FAIR’ AMOUNT! GLA, scaramouche ======================== Oil prices may surge to 150 USD per barrel on Iran risk: S. Korea English.news.cn 2012-01-20 14:23:00 SEOUL, Jan. 20 (Xinhua) -- Global oil prices may surge to above 150 U.S. dollars per barrel due to escalating tensions between Tehran and Washington, a South Korean think tank said Friday. According to a report submitted by the Korea Institute of Finance (KIF) to the Ministry of Strategy and Finance, there exists the possibility for global oil prices to surge after the United States sought to embargo Iranian crude oil, while Tehran threatened to block the Strait of Hormuz, a key waterway for crude oil shipments in the region. The think tank warned that international oil prices could soar to over 150 dollars per barrel on the geopolitical risk, saying that the South Korean government needs to be wary of the potential price destabilizing factor amid inflation expectations that have stayed at a high level since last year. South Korea's imports of Iranian crude oil plunged to a 14- month low of 639,281 tons in December, sharply down from 1,196,073 tons tallied in the previous month. The amount was down from 767, 051 tons in the same month a year earlier. Robert Einhorn, the U.S. State Department's special adviser for nonproliferation and arms control, said Tuesday during this three- day visit to Seoul that "we are urging (our partners) to reduce their purchases of crude oil from Iran and their financial dealing with the central bank of Iran." Meanwhile, the KIF noted that even if global oil prices surge on the possible block of the Hormuz Strait, the price surge would not last long given the negative correlation between oil prices and the U.S. dollars as well as the expected weak demand for oil amid global economic slump. The International Energy Agency (IEA) downgraded its 2012 outlook for daily global demand for crude oil to 1.1 million barrels from the previous 1.3 million barrels. According to the KIF, the greenback, a key safe haven currency, was expected to strengthen over the long run due to Europe's fiscal crisis, leading to put downward pressures on international oil prices that have negative correlation of minus 0.67 with the U. S. dollars since 2010. =====================