Gazprom Neft expands its presence in the Republic of Iraq

"Gazprom oil" through its subsidiary Gazprom Neft Middle East BV has entered into new projects for exploration and development of hydrocarbon reserves in the territory of Iraq. The company has signed with the Iraqi Kurdistan Regional Government, two production sharing agreements (PSAs) in respect of the blocks Garmian and Shakal, located in the south of Kurdistan.

Currently, these units continue exploration work at the end of which no later than 2015 to begin production of raw materials.

In the project development unit Garmian «Gazprom oil" will receive 40%. The Canadian company WesternZagros, another member of the PSA with a share of 40%, is the operator of the project before the main work under the agreement. In block Shakal, in which the proportion of "Gazprom oil" is 80%, the company will receive the status of the project operator. Share of the Kurdistan Regional Government in both Agreements — 20%.

According to estimates, "Gazprom oil" resource potential of both deposits exceed 500 million tons of oil equivalent (about 3.6 billion barrels of oil equivalent).

Total payments "Gazprom oil" for joining the project, including compensation incurred historical costs will be about $ 260 million attributable to equity "Gazprom oil" investment in exploration work in both projects before 2015 are estimated at least $ 150 million mode PSA provides for compensation for costs incurred by the investor after the start of production of raw materials in the fields.

"Based on our positive experience of cooperation with the Republic of Iraq, where we participate in the development of the field Badra, the company decided to expand its presence in the country. A detailed analysis of the economics of the projects and found them highly effective, but also taking into account the synergy of work on adjacent areas, "Gazprom Neft" Kurdistan region is considered a promising area for further exploration and subsequent mining. Implementation of these projects will allow "Gazprom oil" to increase their contributions to the plans of Iraq‘s oil production capacity, gain additional experience working in this country and expand its presence abroad, "- said the first deputy general director of" Gazprom oil "Vadim Yakovlev.

BACKGROUND:

Block Garmian

The block is located in the south-eastern part of Kurdistan, an area of 1,780 sq km.

Shakal Block

The block is located in the immediate vicinity of the unit Garmian, with an area of 474 square meters. km.

Field Badra

Field Badra located in the province in the east Vassit Iraq. According to preliminary estimates, the geological reserves Badra are 3 billion barrels of oil. The contract with the Government of Iraq on oil field development was signed in January 2010 following the last in December 2009 tender, the winner of which is recognized as a consortium of JSC "Gazprom Neft», Kogas (Korea), Petronas (Malaysia), TPAO (Turkey).

Share of "Gazprom oil" in the project is 30%, Kogas — 22,5%, Petronas — 15%, TPAO — 7.5%. The share of the Iraqi government, which is represented in the project by the Iraqi Geological Exploration (Oil Exploration Company, OEC), — 25%. "Gazprom oil" is the project operator.

Under the terms of the contract, investors will be reimbursed the costs incurred and paid compensation in the amount of $ 5.5 per barrel of oil equivalent produced.

Initial production from the field is scheduled for 2013, and by 2017, production is expected to reach 170 thousand barrels of oil per day (about 8.5 million tons per year) and kept at this level for 7 years. Just on the field is expected to drill 17 operational and 5 injection wells.

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