Under the terms of the agreement, Heritage Energy Middle East Limited, a wholly owned subsidiary of Heritage, will serve as operator. Heritage will join the existing and increasing presence of international oil exploration, development and production companies operating in the Kurdistan Region of Iraq.
The license area is 1,015 square kilometers and encompasses the very large Miran structure. This structure, as expressed at surface, constitutes an area of approximately 500 square kilometers and appears to have three separate culminations. Reservoir potential exists at numerous zones that management estimate could contain in excess of 1 billion barrels of oil. Recent drilling results have demonstrated the enormous potential of this region.
In addition, Heritage has also entered into a strategic agreement with the KRG to establish a 50/50 joint venture company, which shall build, own and operate an oil refinery in the vicinity of the license. The refinery, which should have a capacity of 20,000 barrels of oil per day, is scheduled to be operational to design specification within approximately two years. Heritage is especially pleased to be part of this extremely exciting and profitable project that will create value added petroleum products for the region and all of Iraq.
Heritage will commence geological work immediately, having established its local office in Erbil in 2005, and aims to commence a high-impact exploration drilling program in 2008. Heritage has assembled a highly experienced technical team with considerable experience of the regional geology.
The total contractual financial commitment for the Miran License is estimated to be less than US$40 million distributed over the first five year term, which can be extended for a further two years thereafter. The exploration license will be automatically converted into a development license on a commercial discovery.
Mr. Tony Buckingham, CEO, stated: "We are delighted to be among the first international companies to be awarded a license in the Kurdistan Region subsequent to the approval of the Oil and Gas Law in August 2007. We consider this license to be one of the most prospective blocks in this until now under-explored region, with billion-barrel oil potential. This license can become a world-class asset, which would generate significant additional shareholder value for Heritage. Our long-term commitment to the oil industry and further economic development in the Kurdistan Region is demonstrated further by our winning the right to build and operate a refinery in the vicinity of the Miran license in a joint venture with the Kurdistan Regional Government."
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