Kurdistan Investor Field Trip

Transcription

1 Kurdistan Investor Field Trip Kurdistan Region Overview March 2014 Oil Search Limited ARBN

2 Kurdistan Region Location TURKEY Caspian Sea TURKENISTAN KURDISTAN REGION OF IRAQ Erbil Office Sulimaniyah Office SYRIA IRAN Mediterranean Sea IRAQ JORDAN EGYPT Red Sea SAUDI ARABIA Persian Gulf U.A.E. 2

3 Kurdistan Region Overview» A semi-autonomous Region within Iraq and operates under dual Iraq (Federal) law and Kurdistan Region (KR) laws» Policy and major decisions determined by Regional Council for Oil & Gas Affairs Prime Minister, Deputy PM, Ministers for Finance, Planning & Natural Resources» KR population approx. 4.6 million with ~ 70% of workforce employed by the Government» 3 major cities dominate Erbil (~ 1million), Sulaymaniyah (~500000) & Dohuk (~300000). Many small centres and villages» KR covers approximately 40,000 square kilometres (excluding disputed territories)» Significant development over the last 10 years - infrastructure, real estate, education and essential services» Many Kurds are returning from Europe, North America and UK to participate in the opportunities presented» Industry base centred on petroleum, cement works, oil refineries, property development & small business (retail). A small manufacturing base» Reliance on imports for fruit, vegetables and processed foods. Self sufficient in other aspects» Mostly a cash based economy with little take up of banking system financial system is undeveloped» Extensive wireless based communications network with little fibre optic and no copper wire infrastructure» Mix of Sunni and Shia Muslims. Also Arabs, Turkmen & Assyrians» Strong tribal affiliations in addition to ethnic & religious identities 3

4 Iraq & Kurdistan History» Ancient area with a traces of early settled existence 23 rd Century BC. Has been part of Mesopotamia, Roman occupation, and Ottoman control» Iraq established in 1920 under British rule after defeat of the Ottoman Empire. Kurdish ethnic homeland divided between Iraq, Iran, Syria & Turkey under Treaty of Lausanne (1923)» From 1923 Kurds sought recognition and independence (led by Shayk Mahmud Barzani). Successive nationalist movements resulted in autonomy being granted in 1970 under a peace accord with Iraq which collapsed 5 years later, with physical conflict ongoing until the overthrow of Saddam Hussein in 2003» 2005 pivotal year; Iraq National elections & Jalal Talabani elected as President. Constitution adopted recognizing Kurdistan as a provincial region within Iraq (retroactive to 1992) and requiring Kurdish representation on the Presidential Council» 2007 Kurdistan Oil & Gas Law enacted and PSCs signed. Draft 2007 Iraq O&G Law not enacted» Census to be held by 2008 to determine boundaries not undertaken. Boundary line remains an open issue» Constrained by reliance on GOI - KR exports are minor; funding comes from an allocation from the GOI budget based on proportional population which is set at 17%. Allocations from Bagdad in 2013 were $11b & for 2014 are projected to be ~$12.5b» Key issues between Iraq (GOI) and Kurdistan (KRG):» Boundary of the Region entitlement to Kirkuk & related fields ( disputed territories )» Right to & control over management of the oil & gas resource and right to independently export (and receive revenue)» Share of Federal Budget funding» Compensation for Saddam s Anfals claim for US$450B submitted to Baghdad in

5 Government» Iraq constitution: negotiated & approved by referendum in 2005, establishing Iraq as a single federal democratic State including the KR & sharing certain powers with the Regions» Kurdistan Government: Parliamentary system with 111 elected members of which 11 seats are reserved for non-kurdish minority communities of the KR. Elections held every four years» Power share: The two ruling parties (KDP & PUK) have operated under a 50/50 power sharing agreement since the formation of KRG in Contested the 2005 and 2009 elections as a coalition» Change in political landscape: Gorran Party established in 2007 (breakaway from the PUK) has changed the political map of the region. Gorran polled second to KDP in the 2013 election, PUK 3rd» New KRG government (post Sept 2013): Yet to be formed, expected to comprise of representatives from the 3 parties with KDP retaining the majority» Iraqi parliament: (Council of Representatives COR) consists of 275 members. United Iraq Alliance (UIA 85 seats) is the largest bloc. Prime Minister Maliki s Islamic Dawa Party is part of this bloc Kurds are allocated 59 seats in COR and are largely grouped in the Democratic Patriotic Alliance (DPAK 53 members) which acts as a unified voting bloc. Independent or non-affiliated Kurds hold the other 6 seats COR elections (due in April 2014) dominate the relationship and negotiations between KRG and Iraq» KR Laws: Independent Judicial system like Iraq. New Federal laws not applicable in KR unless endorsed through KR legislation 5

6 KR Area is Close to Fully Contracted - Prospective acreage, - resource estimate of 40 billion barrels oil and 60 Tcf gas (USGS, 2010) - Most of the available blocks have been taken up 28 IOCs in the Region J M N I J F Expl/Dev/Prodn Block Taza Block Open Block Oil Field Gas Field Gas/Condensate Field O K L G O D Q F R T E Q J S P F U F P U V W Z F Y Z A X X I H C H B bb C aa Q I F bb Block Operator A Taza Oil Search B Garmian WesternZagros C Topkhana / Kurdamir Talisman D Ain Sifni Hunt E Akre-Bijeel MOL (Kalegran) F Al Qush / Bashiqa / Pirmam / Betwata / Qara-Hanjeer / ExxonMobil Arbat East G Atrush TAQA H Bazian / South Sangaw KNOC I Ber Behr / Chia Surkh / Miran Genel J Dohuk / Tawke / Irbil DNO K Sindi/Amedi Perenco L Sarsang HKN Energy M Central Dohuk Murphy N Sulivani Petroquest O Sheikh Adi / Shaikan Gulf Keystone P Dinarta / Shakrok Hess Q Rovi / Qara Dagh / Sarta Chevron R Barda Rash Afren S Hawler Oryx T Khurmala Kurdistan NOC U Harir / Safeen Marathon V Bina Bawi OMV W Taq Taq Kewa Chirmila TTOPCO X Qala Dze / Piramagrum Repsol Y Khalakan Gas Plus Z Chemchemal / Kor Mor Pearl Pet aa Baranan TOTAL bb Shakal / Halabjah Gazprom 6

7 Ongoing Development of Energy Infrastructure to Serve the Progression of Discoveries 1 3 Fish Khabur 7 TURKEY 5 Tawke Oil Field 5 Dohuk Power Plant 100% Diesel Erbil Power Plant 50-75% Gas Balance Diesel IRAN Taq Taq Oil Field» Current Exports to Turkey 1 Reported ~70,000 bbl/d via truck» Oil pipelines Kirkuk Ceyhan: 2012 exports of 400,000 mmbbl/d versus 1.6mmbbl/d capacity Tawke Fish Khabur: 100,000 bbls/d Taq Taq Khurmala: 20. Capacity ~150,000 bbl/d. Khurmala Fish Khabur: 24-36, Capacity ~300,000 bbl/d New Khurmala Power Plant 125mmscf/d Initially Distillates Khurmala 4 Chemchemal Power Plant 100% Gas» Gas pipelines 6 Kor Mor Chemchemal Erbil power plants, 174km, 350mmscf/d IRAQ Dev/Prodn Block Taza Block Exploration/Open Block Oil Field Gas Field Gas/Condensate Field Oil Pipeline Proposed Oil Pipeline Gas Pipeline Power Plant Refinery Kirkuk Oil Field Miran Kurdamir Garmian Kor Mor Liquids & Gas Field Taza PSC 7 Shaikan Field to Dohuk power plant: 50km (under construction)» Planned oil & gas pipeline South 8 Oil & gas pipeline extension to the Garmian Block planned by KRG*» Refineries & Power Stations 3 Refineries: (~150kbbl/d capacity). Planned expansions set to double capacity over 5 years 4 major Power Plants (2200MW). Planned additions set to double installed capacity over 5 years *As published in The Oil & Gas Year 2013, Kurdistan Region of Iraq 7

8 Export Infrastructure & Export Routes Fish Khabur IRAQ Dev/Prodn Block Taza Block Exploration/Open Block Oil Field Gas Field Gas/Condensate Field Oil Pipeline Proposed Oil Pipeline Kirkuk Field TURKEY Khurmala Fish Khabur - Turkey: ,000 bbl/d mmbbl/d Tawke Field Khurmala - Dohuk: ,000 bbl/d Taq Taq - Khurmala: k bbl/d Kurdamir Garmian IRAN Taq Taq Field Proposed pipeline Kor Mor Field Taza PSC Oil:» KRG 40 oil pipeline connecting Taq Taq field to Fish Kabur on Iraq-Turkey border completed late mmbbl/d capability (export point Ceyhan)» Approx. 1mmbbl of crude oil export injected into new pipeline since January 2014 (in storage)» KRG building closer ties to Turkey, providing long term alternative export route (Turkey- Kurdistan Energy Accord signed March 2013)» Significant step towards achieving sustainable exports from region and unlocking value from oil fields» Turkey cautiously supports KRG export plan but would like Baghdad endorsement» Current production capacity 400kbbl/d» Route to south & north via Turkey (Ceyhan) remains an option subject to agreement with GOI» Domestic refinery demand remains an open market Gas:» Turkey export, domestic power generation, cement, ammonia/fertilizer options 8

9 Oil Export Projections 3500 Iraq and KRG (est.) Historical Production and Exports (EIA) Iraq Production Iraq Exports KRG Production KRG Exports» KRG projection for KRI (December 2013 Minister Ashti Hawrami) - Production target of 1 mmbbl/d by 2015, 2 mmbbl/d by 2020» Iraq projections of 5 mmbbl/d by 2018 & 6 mmbbl/d by 2020 and to be a leader of OPEC production» 53 rigs in the KRI as at late 2013 with more on order & for delivery in 2014» Many discoveries since 2007 with 11 fields declared commercial 11 Declarations of Commerciality Operator Block Field Declaration date DNO International Erbil Bastora Jun-11 DNO International Erbil Benenan Jun-11 Afren Rash Barda Rash Jul-11 Gulf Keystone Shaikan Shaikan Aug-12 DNO International Dohuk Summail Oct-12 OMV Bina Bawi Bina Bawi Mar-13 Genel Energy Miran Miran Aug-13 Kalegran (MOL) Akri Bijeel Bijeel Oct-13 Hunt Oil Ain Sifni Simrit Nov-13 WesternZagros Garmian Sarqala Dec-13 Oryx Petroleum Hawler Demir Dagh Feb-14 9

10 Significant Events in Development of Kurdistan Region Oil Potential ) Oct 2005 Iraqi constitution adopted 2) Feb 2007 Draft federal petroleum law 3) Jun 2007 Agreement on initial revenue sharing 17% of net oil revenues from all regions in Iraq go to Kurdistan 4) Aug 2007 KRG petroleum law approved by KRG Parliament 5) Feb 2011 Iraqi Prime Minister announces Kurdistan PSCs will be respected. Oil exports from Kurdistan resume via Federal system (Ceyhan) 6) May 2011 Federal Ministry of Finance confirms release of the first oil export payment to KRG contractor (approx. 50% of net revenues) 7) June & Sep 2011 Kurdistan producers receive first 2 payments for oil exports from the Federal Ministry of Finance 8) Apr 2012 KRG cease oil export in April due to dispute with the Federal Government 9) Aug 2012 KRG resumes oil exports to progress reconciliation with Federal Government over the oil and gas law 10) Sep 2012 Agreement signed with KRG and Federal Government to increase Kurdistan Region s oil exports and ~$500m payment received from Baghdad 11) Dec 2012 KRG cease oil exports due to ongoing dispute with the Federal Government 12) Jan & Feb 2013 KRG approves trucked oil exports from Taq Taq field to Turkey. KRG (Ministry of Natural Resources) announces intention to build its own export pipeline to Turkey 13) March 2013 Agreements signed with Turkish government for gas supply from KRI. Turkey indicates it will facilitate direct oil and gas exports 14) Nov 2013 Construction completed on the Khurmala Fish Khabur oil Pipeline 15) Jan 2014 Oil export shipments commence in KRG pipeline 10

11 Reasonable Fiscal Terms Summary of Taza PSC terms Total Oil Produced 100 bbls Net Available Oil 90 bbls Royalty Oil 10% of Total Crude Oil 10 bbls Cost Recovery Up to 40% of Net Available Oil 36 bbls Profit Oil Sharing based on R-factor (1) sliding range of 30% - 12% (2) 54 bbls 30% Contractor Group 16 bbls KRG 70% 38 bbls PSC Governance: OSH 75% TOTAL 25% OSH 60% TOTAL 20% KRG 20%» Management Committee (2 MNR reps & 2 OSH reps) for all operational matters 27 bbls 9 bbls 10 bbls 3 bbls 3 bbls» Certain approvals require KRG (Minister) Entitlement approval (e.g. Appraisal & Development plans) Same structure for gas with a different (higher) R-Factor share to Contractor (40% 20%) 11

12 Reasonable Fiscal Terms First mover advantage in Kurdistan 40% 35% Contractor profit oil allocation % (post capacity building payment %) New terms introduced in early 2011 capacity building payment % 30% 0% 25% 3% 3% 0% 20% 15% 20% 20% 30% 20% 30% 30% 40% 10% 5% 0% Tawke Garmian Kurdamir Taq Taq Taza Kurdamir Tawke* Barda Rash Atrush Taq Taq* Shaikan 12

13 Kurdistan Investor Field Trip Kurdistan Regional Geology / Exploration March 2014 Oil Search Limited ARBN

14 Kurdistan Geology Background Reproduced from Petroceltic Presentation 14

15 Location and Regional Setting Kurdistan» Located on the NE collisional margin of the Arabian Plate» Structuration is a result of the collision of Arabia/N Africa with Eurasia» Comprises Low fold Zone in SW to High Fold and Thrust Zone in N and NE» Geological setting and petroleum systems are contiguous with adjacent Iran» Iraq lies in one of the world s most prolific hydrocarbon provinces with numerous supergiant fields, including Kirkuk (20bln bbls) 15

16 Location and Regional Structural Map» Iraq lies on the northern part of the Arabian Platform - a long-lived, gently subsiding, southern continental margin of the Tethys Ocean Taza» The plate motions from the Cretaceous to Tertiary closed the Tethys Ocean, resulting in the collision of the northern edge of the Arabian plate with the Eurasian plate» As the Arabian Platform collided with the Iranian block, structural shortening of the Arabian Platform resulted, forming the Zagros Fold Belt and the Zagros foreland basin» Continued convergence through the later Tertiary produced southward folding and thrusting and produced the anticlines that characterise the Zagros Fold and Thrust Belt. 16

17 Zagros Evolution Plate Tectonics Kurdistan Taza Area Homke, 2007» Taza area located on Arabian Plate positioned in Tethys ocean until Miocene collision» Marine carbonate reservoirs, high TOC source, regional seals 17

18 Taza Area Regional Structure and Objectives Taza Trend Prospective section is younger and deeper moving from High Fold Zone (Cretaceous, Jurassic and Triassic objectives) to Miocene and Oligocene primary objectives in Taza area SW NE Source: Western Zagros presentation 18

19 Southern Kurdistan Licensing Oil and Gas Fields Taza Source: WoodMackenzie 19

20 Kurdistan Region of Iraq Zagros Fold Belt Stratigraphy-Taza Area R R R R S S Taza-1 Oil bearing Oligo-Miocene reservoirs proven in Low Fold Zone fractured carbonates plus dual porosity system Taza-2 planned TD in Shiranish Formation, major reservoir at Kirkuk and Taq Taq S R S R S R Main Sealing Units Main Reservoir Units S S Main Source Rocks 20

21 Example reservoir distribution: Jeribe Formation Source: Oil Search 2013» Jeribe Fm is widespread and its open fracture system will contribute to sustained flow 21

22 Kurdistan Region Iraq Early Movers Pre 2005» The first two licences in Kurdistan were awarded in the early 2000 s - Taq Taq to Addax and Tawke to DNO» Most of the area was vacant with much earlier discoveries at Kor Mor, Chem Chemal and Chia Surkh lying dormant Source: TOGY 2009 Yearbook» OSL involved early on in a number of blocks, but divested due to lack of materiality, retaining Taza due to upside potential 22

23 Kurdistan Contracted Acreage Taza» Since 2007, licencing activity has increased significantly. By the end of 2011 most of the territory administered by the KRG had been licenced.» More than 50 blocks have been awarded.» The blocks have generally been awarded on a negotiated basis.» Almost all of the PSCs are published on the KRG s Ministry website. 23

24 Kurdistan Drilling Success» Exploration and Development in Kurdistan is steadily increasing.» Approximately 55 exploration wells drilled since 2003» More than 40 drilling rigs are currently active in the country» High overall success rate (60%) confirms highly prospective region.» Major oil discoveries: Shaikan (GKP) Tawke (DNO) Barda Rash (Afren) Atrush (Aspect) Kurdamir (WZ) Taza (Oil Search)» Large gas discoveries: Miran West (Genel) Topkana (Talisman) 24

25 Zagros Basin Creaming Curves Shaikan Shaikan Kurkuk» The initial discovery well, Naft Khaneh-1, was drilled in 1920.» 126 exploration wells have been drilled since 1920 resulting in the discovery of 68bn boe.» There is significant remaining potential.» A number of key wells will be drilled during 2014.» The largest field, Kirkuk, discovered in

26 Kurdistan Investor Field Trip Taza Appraisal Programme March 2014 Oil Search Limited ARBN

27 Taza PSC» PSC Effective Date 1 November 2009; Exploration Period of 5 years» Very encouraging results at Taza 1 (2013): Positive test light oil, flow rates 1,100 bopd from Euphrates / Upper Kirkuk Continuous shows over a c. 250m interval from top Jeribe» Currently in Second Sub Period of the Exploration Period, to 31 October 2014» Obligations in current Sub Period are 1 exploration well to be drilled to the Cretaceous and optional seismic» Following Taza 1 discovery, our activity levels in country have increased significantly» Multi-disciplinary appraisal team formed» Appraisal data gathering with further wells, flow testing and 3D seismic during 2014, in order to prepare for a decision on commerciality 27

28 Taza 2 Update Oil Search Limited ARBN

29 Taza 2 update» Taza 2 is the commitment exploration well of the Second Sub-period» Located 10km NNW of Taza-1» To be completed by 31 October 2014» Taza 2 objectives: Complete Taza PSC Second-Sub Period Commitment Penetrate Cretaceous Shiranish Objective Gain appraisal information on the Jeribe/Dhiban, Euphrates and Kirkuk formations away from Taza-1 Facies distribution Fracture distribution Pressure profile and communication Fluid variations Test deeper reservoirs Jaddala, Aliije, Shiranish in a near crestal position on the Taza structure 29

30 Taza 2 Location K K SW Taza 2 K NE L.Bakhtiari U.Fars L.Fars Saliferous Jeribe Euphrates Shiranish Qamchuqa Jurassic - 30

31 Taza-2 Predicted Stratigraphy» 200m of Shiranish planned» Depth as of 12 March 2014 is 2611m at 13.5/8 casing point» Following the setting of the 13.5/8 casing, plan is to drill ahead in 12.1/4 hole to just above the Jeribe Formation, expected at c. 3200m MD.» A further casing string is planned to be set at this depth before drilling ahead into the first reservoir objectives 31

32 Further wells - Taza 3, 4 Oil Search Limited ARBN

33 Taza 3 and 4 Locations» Approximate Top Reservoir Depth Structure» Taza 3 southeast well for structural, reservoir and fluid constraint near plunge» Taza 4 Forelimb (western) well for structural, fluid, and reservoir constraint, also fracture characterisation and distribution Taza 4 Potential Location Taza 3 Location 33

34 Location of Taza 3 34

35 Location Window for Taza 4 Taza 4 Target Box 35

36 Taza 3D Seismic Oil Search Limited ARBN

37 Taza 3D Seismic Survey Euphrates ML Depth Map 3D Survey Area» Key contracts awarded and preparatory work has started» Mobilisation of equipment and personnel to field initiated at end-february» Camp construction ongoing» ERW survey initiated» Seismic acquisition expected to begin this month» 2D long-offset dip line to be acquired through potential Taza 4 location Acquire before 3D survey Wide Azimuth processing to image deep structure and steeper dips Use for 3D parameter testing 37

38 Taza 3D - Status» ERW clearance mobilising into field» Start-up meeting held with AOFS on Jan 29 in Erbil» AOFS mobilising camp» AOFS currently organising Security, arranging local hiring committee and preparing HSES documents (Seismic Risk Plan, ERP, Bridging Documents, etc.)» AOFS surveyors in field checking Control Stations from 2010 survey to ensure that 3D survey is to a common datum.» Community engagement ongoing re duration and nature of work and local hiring opportunities 38

39 Taza Early Development Potential Oil Search Limited ARBN

40 Taza Extended Well Test / Early Production Facility» Investigating the potential to bring in a 5,000 bopd facility for a long term test period on one of the existing or new Taza wells.» EWT / EPF has a number of strategically important objectives. Specifically to demonstrate: Example 10,000 bopd EPF in Kurdistan Shaikan 1 EPF Sustainable production rates with a safe, clean and reliable operation Quality data to further evaluate the well and reservoir pressures, fluids, performance Decision support for the EWT facility expansion to EPF with 10,000 bopd capacity as first phase of development Longer term investigation of the presence of H2S / CO2 which were observed in the Taza 1 well tests 40

41 Development Concept Select Study» Oil Search is conducting a prequalification process to identify and engage a Concept Select partner to carry out option selection studies for Taza Development and to ensure the field is developed as efficiently as possible» We are in the process of identifying, screening, and selecting a group of specialist contracting organisations capable of performing these concept selection option studies who have prior MENA experience in similar reservoirs» Currently there are 5 contracting organisations completing a prequalification / EOI submission process 41

42 Kurdistan Investor Field Trip Community Affairs March 2014 Oil Search Limited ARBN

43 Taza Block Demographics» Approx residents on site across 27 villages. 11 former (destroyed) villages uninhabited» Many former residents & family descendants have migrated to nearby towns» Subsistence lifestyle relying on seasonal agriculture & herding» Limited infrastructure which varies between villages» Predominantly Kurdish» 10 villages with schools

44 CA/CSR Activity» Dedicated Community Affairs team currently of 8 local staff and two expats» Working closely with local authorities on labour hire & work opportunities» Openly available to the community and enjoy a very good relationship» Community Development projects directed at high impact areas schools water and electricity supply road upgrade projects general community projects

45 Focus Areas» People Capacity Building (Training & Competency) Organization requirements to identify roles and plan for Kurdish citizens Education & skills development (University College)» Local content The Taza activities to date have created business and work opportunities for 352 people from the local area. This will be magnified by the 3-D seismic program New local business activities to service Taza operations» Community Programs Block & regional opportunities and potential sharing with adjacent PSC Operators New agriculture opportunities & improve current techniques Revegetation

46 Oil Search Limited ARBN

47 Disclaimer While every effort is made to provide accurate and complete information, Oil Search Limited does not warrant that the information in this presentation is free from errors or omissions or is suitable for its intended use. Subject to any terms implied by law which cannot be excluded, Oil Search Limited accepts no responsibility for any loss, damage, cost or expense (whether direct or indirect) incurred by you as a result of any error, omission or misrepresentation in information in this presentation. All information in this presentation is subject to change without notice. This presentation also contains forward-looking statements which are subject to particular risks associated with the oil and gas industry. Oil Search Limited believes there are reasonable grounds for the expectations on which the statements are based. However actual outcomes could differ materially due to a range of factors including oil and gas prices, demand for oil, currency fluctuations, drilling results, field performance, the timing of well work-overs and field development, reserves depletion, progress on gas commercialisation and fiscal and other government issues and approvals.