In its interim results, announced this morning, Petrel Resources said it may review its strategy in Iraq following failure to qualify for bidding in the 4th energy licensing round:
After 14 years in Iraq it continues to frustrate. The economy remains fragile, as does the security situation. There is still no hydrocarbon law. As such, our legal position is in limbo on the 10,000 sq km area of ground in the Western Desert formerly known as Block 6. We will protect our interest in this block.
The terms on offer in the recent 4th licencing round were very tough. Indeed in numerous instances we remain nonplussed as to how the super-majors will ever make money. We struggled to explain the financial logic behind bidding for low returns in projects which involved geological, as well as operational and political risks.
Required economic rates of return have risen with the enhanced uncertainty of recent years. Politicians do not always understand that risk and reward are correlated, but the financial markets do.
Nevertheless, because of our operating experience and long-standing commitment to Iraq, we prepared detailed comprehensive proposals for the 4th Licencing Round. We had high expectations of making the approved list but it did not happen. We are taking a fresh look at our approach in Iraq. This may lead to a change in strategy. Iraq still offers the best hydrocarbon potential worldwide but it does not make sense to work for inadequate returns.