In a step that further builds its resource base in the Kurdistan Region of Iraq, Genel Energy announced on Monday that it is to acquire a 23 per cent stake in the Bina Bawi exploration licence. The Bina Bawi licence lies alongside the producing Taq Taq oilfield where current potential output is some 80,000 barrels a day and is projected to rise to some 200,000 barrels a day.
Bina Bawi licence covers an area of 246 square kilometres to the east of Erbil. Genel said two of the three wells drilled on the block to date had encountered significant hydrocarbons.
The acquisition will be made through the purchase for $175 million of all of the share capital of A&T Petroleum Company Ltd, current holders of the stake. A&T is wholly owned by Petoil Petroleum and Petroleum Products International Exploration and Production Inc. The deal will be financed from Genel's existing cash resources.
Genel CEO Tony Hayward said:
"What we are acquiring is very high-quality acreage in an area immediately adjacent to Taq Taq, one of our major established fields which we plan in due course to link by a pipe line to the region's main export pipeline from Kirkuk to Ceyhan.
"The transaction fits neatly with our strategy of building our Kurdistan resource base through the steady, considered addition of promising acreage."
Genel said the first well drilled on the block in 2007 on a large surface anticline Bina Bawi-1, had encountered significant shows of 35-degree API oil while drilling through the Cretaceous zone and tested 6 million standard cubic feet of gas a day in the Triassic zone.
The third well, Bina Bawi-3, completed recently by block operator OMV on the same structure, had encountered a gross hydrocarbon column of more than 800 metres in the Jurassic zone. Two Jurassic reservoir intervals tested separately had achieved an aggregate flow rate of more than 4,000 barrels a day of light, 44 to 47-degree API oil.
Genel said a further gross hydrocarbon column, estimated at over 1,000 metres, in the Triassic zone of Bina Bawi-3, remained untested but had confirmed the gas find made in the first well in 2007.
The overall results of Bina Bawi-3 continue to be reviewed, including the evaluation of deeper potential targets in the Triassic reservoirs. Further exploration/appraisal drilling is planned for this year and next, along with an early production test that should start up in early 2013.
"Our estimate is that the Bina Bawi discovery has contingent resources of some 500 million to 1 billion barrels of oil and oil equivalent, with some additional prospective upside," Hayward said.
On completion of the purchase, which is subject to various consents, approvals and assurances, including from the Kurdistan Regional Government (KRG), Genel Energy will hold a 23 per cent interest in the Bina Bawi production sharing contract, OMV a 36 per cent operated interest and Prime Natural Resources a 21 per cent interest. The KRG will retain a 20 per cent working interest which is carried by the contractors on a pro rata basis.
"Genel Energy is already the biggest oil producer in the region and has one of the strongest reserves base" Hayward said. "This deal enhances that position and confirms our continuing confidence in the immense potential of the Kurdistan Region and our determination to play a leading role in its ongoing development."