Petrel Issues Iraqi Project Update

Petrel Resources, which is developing the Subba and Luhais Oil Field in Iraq, says that it has encountered no insurmountable security problems on the project to date.

"Our project development is proceeding according to plan," said David Horgan, Petrel's managing director. "There are risks but they are manageable ... We have encountered no insuperable security problems."

Horgan added that Petrel has expanded its presence in Baghdad and elsewhere in Iraq. "The Subba & Luhais Project provides an infrastructure for advancing all our activities in Iraq," he said. "The Iraqi authorities continue to give encouragement and support. We look forward to the formation of the national government following successful elections with a high participation rate."

Petrel also has mobilized project personnel, initiated engineering work, formed a joint venture with local partners, and opened and activated a letter of credit.

"Petrel has attracted excellent partners and suppliers," said Horgan. "We have built a team experienced in overcoming technical challenges in fluid environments. The project is fully staffed and work is underway."

Earlier this month, Petrel and its partners held technical meetings with the Iraqi Ministry of Oil State Company for Oil Projects (SCOP) to present design work to date and review their overall schedule. The parties agreed on processing and design conditions.

"Prior involvement of major suppliers (such as Gas Compression Systems) confirmed the technical and commercial basis of supply as we had originally tendered," said Horgan. "We anticipate placing long lead orders during the 3rd quarter of 2006.

Petrel also reports that SCOP confirmed its desire to use the associated gas produced from the Luhais field--rather than follow the historical method of flaring. "Accordingly we established a work group to prioritize and expedite plant deliveries to achieve early revenue," Horgan noted. "This will also provide environmental and operational benefits. This confirms official confidence in our abilities and commitment to help develop the Luhais and Subba oil fields."

Horgan said that Petrel's focus is now twofold. First, it is concentrating on design definition as part of the company's front end engineering design program for SCOP review and acceptance in the 3rd quarter of 2006. Also, the company is focusing on securing equipment and delivery conditions for the long lead items and pipeline material.

Petrel is developing the Subba and Luhais project through a joint venture with a large Iraqi group, Makman. The JV has established structures and responsibilities within the combined company. Personnel have been mobilized to project offices in Baghdad, London, Italy, and Istanbul.