Gulf Keystone Signs PSC with KRG for Stake in Shaikan Block
Gulf Keystone Petroleum has signed a Production Sharing Contract ("PSC") with the Kurdistan Regional Government ("KRG"), for the exploration, development and production of hydrocarbon resources in the Shaikan Block in the Dihok area of the Kurdistan Region in Northern Iraq. The Shaikan Block is situated approximately 85 kms North-West of Erbil and covers an area of 283 square kms.
The interests under the PSC are GKPL 75%, Kalegran 20% and Texas Keystone 5%. Texas Keystone, a private American exploration and production company, initially led the pursuit of opportunities in the Kurdistan Region and participated in the successful signature of this PSC for the Shaikan Block. In return for Texas Keystone's continuing participation, Gulf Keystone will carry Texas Keystone's 5% share of initial costs and expenses prior to drilling the first well.
GKPL will operate the Shaikan Block. The planned work program includes the acquisition, processing and interpretation of 100 kilometers of 2D seismic and the drilling of one exploratory well. The commercial terms of the PSC are in line with the terms and conditions published by the Kurdistan Regional Government on its website.
Participation interest in Akri-Bijeel Block:
In consideration for introducing Kalegran into the Shaikan partnership, GKPL has received a 20% interest, on a ground floor basis, in the MOL operated PSC covering the Akri-Bijeel Block. The Akri-Bijeel Block is adjacent to the Shaikan Block. The interests in this PSC are Kalegran 80% and GKPL 20%. The commercial terms of the PSC are in line with the terms and conditions published by the Kurdistan Regional Government on its website. This exchange of acreage participation between Kalegran and GKPL was carried out with the consent of the Kurdistan Regional Government concurrently with the execution of the PSC agreements.
In Akri-Bijeel, Kalegran plans to acquire some 200-line km of 2D seismic and has an option to drill an exploration well within the first 3-year term.
Both the PSCs have a duration of 25 years, and an initial 3-year exploration phase. Gulf Keystone's expected total expenditure for these two blocks over the next three years, given its current interests, is approximately US$53 million, the majority of which is expected to be incurred over the next six months. This estimate includes GKP's share of general and administration costs, seismic acquisition and processing, drilling costs and initial signature bonuses.
David Mackertich, Executive Vice President Exploration, said:
"Since the opening of our Erbil office, in January 2007, we have undertaken a significant amount of technical work which has enabled us to identify the potential opportunity that these two blocks offer.
The Shaikan structure appears to cover a significant portion of the block, and the possibility exists for multiple reservoir targets as is common in many fields across Iraq. Our initial exploration program will be targeted at testing what is known as the Shaikan structure, which we believe resides in a play fairway which we consider extends across the region and includes the recent Tawke discovery. The Tawke Field lies in the adjacent block and some 60 km to the northwest of the Shaikan Block.
We plan to acquire our 2D seismic data in Q1/Q2 2008 and drill our first exploration well later in that year.
We believe the Akri-Bijeel Block offers complementary prospectivity to that seen in the Shaikan Block".
Todd Kozel, Chairman and Chief Executive Officer, commented:
"Gulf Keystone is delighted to have concluded the Shaikan PSC with the Kurdistan Regional Government and its partners MOL and Texas Keystone. We are looking forward to commencing operations and getting the work program underway in this highly prospective area. We are also pleased to be partnering with MOL on its Akri-Bijeel Block, which is adjacent to the Shaikan Block. This will give Gulf Keystone exposure to a wider portfolio of exploration opportunities within the Kurdistan Region, and a further opportunity for close co-operation with its partners in the Kurdistan Region."
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