Petrel Resources Remains Committed to Iraq

John Teeling, Chairman of Petrel Resources, made the following comments on the company's Iraqi operations in its preliminary results for the Year Ended 31 December 2011:

"First formed in the 1980's to explore offshore Ireland, Petrel entered into Iraq in 1999. We worked diligently with the Iraqi Oil Ministry and in 2002 agreed an exploration lease on a 10,000 sq km area in the Western Desert.

"This was approved by the Oil Ministry but not the supreme authority. Post 2004, Petrel was successful in obtaining a large oil field construction contract, Subba and Luhais, and Technical Cooperation Agreements on two undeveloped oil fields, Merjan and Dhufriyah.

"A local partner was imposed on Petrel at the signing of the Subba and Luhais agreement. Difficulties arose in the execution of the contract and after extensive negotiations Petrel withdrew from the contract with $ 7m in compensation and a 10% net profits interest. The project is virtually complete but we expect no further payment.

"Since 2008 we have applied to be pre-qualified for four licencing rounds. To date we have been unsuccessful. When compared to the super-major and giant national oil companies who applied in the early rounds, our small size militated against us - though we had strong in country experience.

"It must be said that even had we pre-qualified there is no certainty that we would have completed a deal. Iraqi terms are very difficult and it is not clear how economic they are for investors. But we remain committed to Iraq. It is the best and cheapest place in the world to find oil and gas.

"The current political, economic and legal uncertainties will be ironed out but it could take time. We have recognised that our existing structure has been unsuccessful so we are in the process of establishing a new Baghdad based specialist oil team who will further our Block 6 interests as well as seeking out new opportunities."

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