KRG Minister for Natural Resources Dr. Ashti Hawrami announced that the KRG has awarded two production sharing contracts and approved the assignment of Third Party Interests in a number of existing contracts to Korea National Oil Corporation.
The announcement comes a day after the KRG announced two other petroleum contracts, with Talisman Energy Inc.
“We are very pleased to strengthen our relationship with KNOC and with the Korean people who as part of the coalition forces have contributed to the stability of our region since 2004. The growing presence of KNOC followed by significant Korean private sector infrastructure investment will secure our mutual prosperity,” said Dr. Hawrami.
The contracts were signed by KRG Prime Minister Nechirvan Barzani and Dr. Hawrami, together with KNOC representatives, headed by Dr. Seong-Hoon Kim, Executive Vice President of New Ventures & Exploration, in Erbil on Saturday, June 21. The contractual terms had been approved after the Memorandum of Agreement reached between the parties during an official visit by the KRG delegation, headed by Prime Minister Barzani, to Seoul in February of this year.
“We are delighted to expand on our existing operations in the Kurdistan Region of Iraq and to underpin our access to significant sources of potential oil reserves to secure the energy needs of our country,” said Dr. Kim. “The region is in need of economic development and the implementation of basic infrastructure projects, which the Korean involvement will aim to support.”
KNOC will take a 60% interest in the Sangaw South Block, with the remaining 40% participation interest held by the KRG. KNOC will also take an 80% participation interest in the Qush Tappa Block (published in some KRG block maps as “Block K26”), with the remaining 20% participation interest held by the KRG.
KNOC will receive Third Party Interest allocations of 15% in an existing PSC comprising four blocks containing two discoveries (Hawler Block), 20% interest in another PSC (Sangaw North Block) and a further 20% in the Bazian Block, which was previously awarded to a consortium of Korean oil companies led by KNOC.
KNOC has agreed to allocate some of its income from the share of its profits from the oil finds to support a large program of infrastructure and capacity-building in the Kurdistan Region. This program was agreed between the KRG and a consortium of Korean infrastructure companies in Seoul, also in February this year. The program is designed to solve some of Kurdistan’s pressing problems related to power generation and distribution, water purification, and the building of a major highway linking the three main provinces of Kurdistan. The initial investment related to this program will be in the region of 2 billion US dollars.
The contracts agreed with KNOC are based on the KRG’s published model production sharing contract and commercial terms and conditions. As with all Kurdistan Region petroleum operations, the contracts are governed by the Kurdistan Region Oil and Gas Law, which entered into force in August 2007.
KNOC will be entitled to petroleum cost recovery from the contracts and to receive a share of the profit oil, based on a formula defined in the KRG Oil and Gas Law and the KRG’s published commercial terms.
With respect to the Government share of profit oil, the KRG has volunteered a commitment to forward petroleum revenues from the Kurdistan Region for Iraq-wide revenue sharing when a federal revenue sharing law is in place. The KRG is bound by law to the principles of the Extractive Industries Transparency Initiative.