A few aggressive exploration companies see huge opportunity in the semi-autonomous Kurdistan area of northern Iraq, and they back that insight with strong wells and large potential fields.

“On 6 September 2007, Addax Petroleum announced the results of the latest appraisal well on the Taq Taq field in eastern Kurdistan. An aggregate light oil flow of 37,560 b/d confirmed the potential in the field, which, by Iraqi standards, is of relatively modest scale,” said Wood Mackenzie’s “Upstream Insight” report on the Middle East in September.

Addax and partner Genel Enerji of Turkey are working a six-well appraisal program to map the Taq Taq reservoir and design a field development program. All wells tested to date have been successful. According to Wood Mackenzie, estimates of oil in place range from 1.2
billion to 2.7 billion bbl, and ultimate reserves should come in higher than 250 million bbl. A US $1 billion development program should produce at a peak rate of 200,000 b/d of oil.
At 115 billion bbl of proven oil reserves, Iraq holds the third largest conventional oil reserves in the world after Saudi Arabia and Iran. The majors and many larger companies see the highest potential in the supergiant fields of southern Iraq and, in a way, that has created a huge opportunity for smaller companies in the north.

Iraq put together a new oil and gas law earlier this year and submitted it to the nation’s legislature, where it has been tied up in conflicting political priorities and a host of modifications of a final draft.

Meanwhile, Kurdistan moved ahead with licensing tracts to international companies. That made the central government unhappy, but Kurdistan said its licensing procedure follows the national law and will be legal when that law is passed.

Major companies have been reluctant to take advantage of Kurdistan’s offer, fearing they may make central Iraqi officials mad enough to exclude them from bidding on the southern fields.

Aggressive independents, meanwhile, figure they probably would be squeezed out of bidding on southern properties by the majors and have opted for the available potential in Kurdistan.
Addax isn’t the only winner in this game. Denmark’s DNO qualified for a license for Tawke field in extreme northern Kurdistan near the Turkish border. Its latest well, the Tawke-8, tested at an aggregate rate of 20.5 MM b/d from five zones and confirmed the company’s projections for production from deeper formations.

Northern Kurdistan has experienced bombing attacks recently as Turkish aircraft attacked Kurdish guerilla units that allegedly had staged raids in Turkey and fled across the border to anticipated safety in Kurdistan. The Kurdistan government has called for a halt to
the violence.

Heritage Oil Corp. was an early entrant into the Kurdistan area as it formed a joint venture with Iraq’s Eagle Group in Kurdistan and registered the K Petroleum Co. (KPC) in both Baghdad and Erbil, Kurdistan. That alliance could well represent a bridge to smoothing relations between Baghdad and Erbil.

In October this year it signed a contract on the Miran block about 19 miles (30 km) from Taq Taq field and about 34 miles (55 km) from giant Kirkuk field with remaining reserves of some 10 billion bbl of oil.

Heritage Chairman and Chief Executive Officer Micael Gulbenkian has family connections in

Addax Petroleum’s Taq Taq field appraisal program featured one well with 37,560 b/d of production potential from multiple zones. (Photo courtesy of Addax Petroleum)
Iraq that go back for centuries. Nechirvan Barzani, prime minister of the Regional Government of Kurdistan, said, “KPC, in view of its regional local strategy, is ideally placed to obtain licenses with support of the central government and ourselves to operate fields in the north.”
At first, the company plans a service agreement as it develops the field toward an anticipated 50,000 b/d production level, but it wants to convert that agreement to a production sharing contract. The venture also plans a 20,000 b/d oil refinery near the license area, and that plant should come on line in about two years.

Meanwhile, the Kurdistan government gave Baghdad authorities another couple of nudges toward forcing a decision as it signed production sharing agreements, first with Dana Gas for the Kormor and Chemchemal gas fields, and later with Hunt Oil for a block in the Dihok region.

While the Baghdad government did not come right out and call the agreements illegal, it did say the companies must have a federal endorsement to gain legal status, according to Wood Mackenzie.

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