Gulf Keystone Petroleum has issued the details of the payments made to governments for the year ended 31 December 2015, as required under the Disclosure and Transparency Rules of the UK Financial Conduct Authority.
Basis for preparation
Total payments below £86,000 made to a government are excluded from this report as permitted under the Regulations.
All of the payments made in relation to the Shaikan Production Sharing Contract ('PSC') in the Kurdistan Region of Iraq ('KRI') have been made to the Ministry of Natural Resources of the Kurdistan Regional Government ('KRG').
Estimated production entitlements
Production entitlements are the host government's share of production during the reporting period from the Shaikan Field operated by Gulf Keystone. The figures reported have been produced on an entitlement basis rather than on a liftings basis. Production entitlements are paid in-kind and the monetary value disclosed is derived from management's calculation of estimated revenue from the field.
Royalties represent royalties paid in-kind to governments during the year for the extraction of oil. The terms of the Royalties are described within the Shaikan PSC. Royalties have been calculated on the same barrels of oil equivalent basis as production entitlements.
Summary of payments
(1) Under the lifting arrangements implemented by the KRG, the KRG takes title to crude at the Shaikan facility and then trucks it to Fishkabour on the Turkish border where it is injected into the export pipeline to Ceyhan in Turkey. The crude is then sold by the KRG into the international market. All proceeds of sale are received by or on behalf of the KRG, out of which the KRG then makes payment for cost and profit oil in accordance with the PSC to Gulf Keystone, in exchange for the crude delivered to the KRG. Under these arrangements, payments are in fact made by or on behalf of the KRG to Gulf Keystone, rather than by Gulf Keystone to the KRG. For the purposes of the reporting requirements under the Regulations however, we are required to characterise the value of the KRG's entitlement under the PSC (for which they receive payment directly from the market) as a payment to the KRG.
(2) The realised prices on export sales remain subject to audit and the establishment of a retroactive quality bank for Kurdistan crude exports delivered through the international pipeline to Turkey.
(3) Barrels of oil.