As explained during the presentation given at the Market and Media Update on September 28, 2009, DNO signed two Production Sharing Agreements (PSA) in Kurdistan in 2004. DNO was the only participant to the PSA at the time with a 40 % economic/beneficial interest. On several occasions DNO communicated to the market that the final terms of the contracts would be subject to final review and the additional participants on the PSA's would be reported in due course.
Following implementation of, and in accordance with, the new oil and gas law in the Kurdistan Region in 2007, all contracts were subject to review to comply with the new legislation. In all countries, including Norway, there are certain requirements to be fulfilled for companies which apply for contracts for exploration and production of oil and gas. For DNO's contracts in Kurdistan such review was completed in March 2008.
As reported at the Market and Media Update on September 28, 2009, DNO is involved in arbitration proceedings related to certain third party interests in Kurdistan. Such third parties were not approved to be part of or have any rights in the PSC's following the reviews which were completed in March 2008.
DNO has rejected the basis for any claims from such third parties, which relates to up to 10% beyond DNO's interest in the PSC. The first part of the arbitration has ruled the right to seek compensation for damages from DNO Iraq AS, which is a subsidiary of DNO International ASA. The arbitration proceedings are therefore continuing and a final award with respect to possible compensation for damages is expected in the second quarter of 2010.
Accordingly there are no other parties who have any rights to an interest in the PSC's, beyond what were reported on April 6, 2009.
Ongoing arbitration proceedings are confidential as is any award, subject of course to any legal obligation on DNO to disclose or report any future possible award. DNO is therefore unable to make any further comments related to the arbitration.
There has been no formal statement of claim specifying the damages requested in the arbitration to date. During our ongoing discussions with KRG we have understood that the arbitration is not part of the present suspension period in Kurdistan, which DNO is working to resolve as soon as possible.
DNO has reported the arbitration in the note to the 2008 Annual report and in the notes to the Second Quarter 2009 Interim Report. No further information can be given at this stage.