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Gulf Keystone has provided an update on its four blocks in the Kurdistan Region of Iraq, including the world class discoveries at Shaikan and Sheikh Adi, as well as Akri-Bijeel and Ber Bahr:

Background

With the Shaikan commercial discovery alone, Gulf Keystone has one of the world's largest onshore conventional oil & gas developments with a Pmean 13.7 billion barrels of gross oil-in-place as set out by Dynamic Global Advisors, independent Houston-based exploration consultants. A recent report by Goldman Sachs highlights the scale of the Shaikan development and the fact that in 2015 the global production increase will in part come from the Shaikan field*. The Company continues to be highly active with the drill bit, in order to further prove the value of its blocks.

Today Gulf Keystone is on the verge of moving into a phase of significant production, with the capacity to produce up to 40,000 barrels of oil per day ("bopd") from Shaikan in the coming months and up to 400,000 bopd in the coming years. The Company will be a key contributor in meeting the Kurdistan Regional Government's oil production targets of 1 million bopd in 2015 and 2 million bopd by 2019.

Considerable progress is being made on the regional pipeline infrastructure development and the Company's increasing production will be matched by the available export capacity. The size and quality of the Company's fields is now increasingly recognised and a number of the world's largest oil companies, including ExxonMobil, Chevron and Total, are now following Gulf Keystone's lead and commencing active work programmes in the Kurdistan Region of Iraq.

*Goldman Sachs: April 12, 2013 - "380 projects to change the world. From resource constraint to infrastructure constraint"

Commenting on today's announcement, Todd Kozel (pictured), Executive Chairman and CEO, said:

"As one of the first companies to see the potential of the region, over the last five years Gulf Keystone has drilled or participated in nearly 20 wells and remains one of the most active operators in the Kurdistan Region of Iraq. Shaikan is the largest onshore development worldwide today not in the hands of a major operator. However, we believe that we have only scratched the surface of the true value of our blocks and our ongoing exploration and appraisal activity is expected to result in further upside.

"The Company is encouraged by recent reports from a variety of sources, including political spokespersons, regarding the close and burgeoning ties between the Kurdistan Region of Iraq and Turkey, which the Company believes presents further transformational progress for the region. In this context, Gulf Keystone will play a major role as a co-host of the 2nd International Energy Arena Conference in Erbil on 30 May, a meeting place for key political and industry decision makers on the energy cooperation between the Kurdistan Region of Iraq and Turkey.

"I therefore strongly believe that there is considerable momentum in the development of Kurdistan's vast natural resources and Gulf Keystone is in a prime position to benefit as the region moves to this next stage.

"Our remarkable journey continues and I remain indebted to our hosts in the Kurdistan Regional Government and to the outstanding team within our Company.  We have never been more excited about the future."

By John Lee.

Russian news agency RT reports that Rosneft is considering a joint venture with ExxonMobil in Iraq.

Company President Igor Sechin (pictured) told reporters:

"We will work with anyone who offers good terms, we'll work with ExxonMobil too."

An Iraqi oil ministry delegation will visit Moscow on 10th May to discuss the deal.

(Sources: RT, Reuters)

By John Lee.

Indonesia's Coordinating Minister for the Economy, Hatta Rajasa (pictured), has said Pertamina is considering taking a stake of up to 20 percent in the West Qurna-I block, which is owned by Exxon Mobil.

According to a report from Fox Business, Mr. Rajasa told reporters:

"Exxon has got a new oil field in another part of Iraq and because of that it has to sell its stake in the West Tuba [sic] as required by the regulation set by the government of Iraq."

(Source: Fox Business)

By John Lee.

The Iraqi parliament passed the 2013 budget of the 138 trillion Iraqi dinars ($118.5 billion) on Thursday, allocating to Kurdistan just a fraction of the oil revenue the region requested, reports Wall Street Journal.

Ibrahim al-Mutlaq, a member of the parliamentary finance committee, said the budget allocates 750 billion Iraqi dinars ($644 million) for oil companies operating in the semi-autonomous region, which include majors such as Exxon Mobil, Gazprom Neft and Chevron; the Kurdish government had asked for $3.5 billion, including outstanding payments covering all exports between 2010 and 2013.

The budget decision adds to existing tensions between the Kurdish region and Baghdad over oil exploration rights, trade with Turkey and the redevelopment of oil fields in a disputed territory.

Kurdish lawmakers boycotted the session which led to the passing of the budget, Mr. al-Mutlaq said.

Jaber al-Jaberi, an Iraqiya MP among those who boycotted the session, said he expects the Kurds to go to the federal court to disrupt the budget.

(Sources: WSJ, Reuters)

The Chairman of PetroChina has told Reuters that his company is willing to join Exxon Mobil in the 400,000-bpd West Qurna-1 oilfield project.

Jiang Jiemin (pictured) told the news agency:

"We are willing to jointly develop the project with Exxon Mobil. Exxon Mobil welcomed our participation and the Iraqi government also supports us joining the development ... The asset value of the whole project is massive, but near-term capital spending required is not that huge."

He went on to say that the PetroChina, owned by the China National Petroleum Corporation (CNPC), would "thoroughly evaluate the project" and make an investment decision at an "appropriate" time.

Exxon is understood to be considering various options to resolve the difficulties caused by the company's activities in Iraqi Kurdistan, which Baghdad regards as illegal, and the Ministry of Oil may be willing to offer better terms. One option for Exxon may to to sell part of its 60 percent stake while remaining as operator.

CNPC made a play for Exxon's full stake in West Qurna-1 at the end of last year, but the U.S. company was not satisfied with the bid, according to industry sources.

(Source: Reuters)

By John Lee.

Exxon Mobil has begun exploration for oil in Kurdistan Region, according to a report from PUKmedia.

Safeen Dezae, Spokesman for the KRG, told the news agency that the company began its first stage of exploration with the scoping of locations; the second stage will involve exploratory drilling.

Regarding the impact of the company's working in the Region on the Federal government,

Dezae said that the constitution allowed the province or region to deal with newly found oil fields, adding that there are no legal or constitutional problems regarding this matter.

He called for the passing of the oil and gas law to resolve any conflicts,

(Source: PUKmedia)

By John Lee.

Oil giant ExxonMobil has reportedly hired former U.S. ambassador to Iraq, James Jeffrey (pictured), as a consultant.

The company was recently told that it must choose between working in Iraq's southern oilfields, where it operates the $50 billion West Qurna 1 oilfield, or in Kurdistan, where it has signed exploration deals.

Exxon’s chief executive Rex Tillerson met with Iraqi Prime Minister Nouri al-Maliki and with Kurdistan’s President Barzani recently to discuss operations in both areas, while industry sources said the US oil major was considering an offer from Baghdad.

According to Reuters, it was unclear whether James Jeffrey was hired specifically to handle the dilemma and its fallout, but industry sources and diplomats said it was likely to work in the central government's favour.

"He probably has better relations in Baghdad than in Arbil," said a former U.S. diplomat on condition of anonymity.

Iraq Oil Report says that when ExxonMobil signed the six oil deals with the Kurdistan Regional Government (KRG) in October 2011, then-U.S. Ambassador James Jeffrey was "furious", as he was forced to manage the aftermath.

(Sources: Reuters, Iraq Oil Report)

By John Lee.

Iraq has again told Exxon Mobil that it must choose between working in its southern oilfields or in Kurdistan.

Reuters reports that Oil Minister Abdul Kareem Luaibi [Elaibi] expects the company to make a final decision within a few days, adding:

"We made it clear to Exxon in the last meeting that the answer we expected from them is either to work in the Kurdistan region or to work in southern Iraq ... Exxon Mobil cannot work in both fields at the same time."

"Other oil companies that signed deals in Kurdistan region should face the same scenario", said Luaibi, "and we have informed them".

Exxon's chief executive Rex Tillerson met with Iraqi Prime Minister Nouri al-Maliki and with Kurdistan's President Barzani last week to discuss operations in both areas, while industry sources said the US oil major was considering an offer from Baghdad.

(Source: Reuters)

By John Lee.

Prime Minister Nouri al-Maliki held talks with ExxonMobil chief Rex Tillerson (pictured) on Monday.

AFP reports that the meeting was the first between the two since the firm signed an oil exploration agreement with Kurdistan in October 2011, a move which angered Baghdad, which has said the company must choose between its deals with Baghdad and Erbil.

Late last year Exxon informed Baghdad that it wanted to sell its stake in the West Qurna-1 project, indicating it would focus on the controversial Kurdish deal.

Maliki appeared to once again rule out the sort of production-sharing deals that Exxon has signed with Kurdistan, arguing that Iraq's oil "belongs to all Iraqis ... Iraqis are partners in the oil that is discovered in any part of Iraq, they cannot be partners in Basra and not partners in other areas".

Tillerson is said to have expressed Exxon's keenness to "continue its work and expand in Iraq", while also apparently mentioning "important decisions in this area" that would be taken, though no further details were provided.

(Source: AFP)

A new report from Deloitte, entitled "Mergers and Acquisitions in the Oil and Gas Industry -- Current upstream M&A issues and transaction considerations", looks at the factors affecting investment in Iraq:

"Iraqi production, which has now passed the 3 million barrel per day level, is benefiting from foreign investors with the expertise to exploit these resources.

"The question remains as to whether these nations will achieve optimum production levels or whether they will continue to face constraints due to outdated infrastructure, political challenges (such as in Iraq), policy uncertainty and continued security threats.

"The fiscal terms being offered by governments have been on the top of the agenda for contractors with assets in countries affected by the Arab Spring and consequent regime change. This issue has been under the spotlight recently in Iraq and the semi-autonomous Kurdistan Regional Government (KRG) in the north.

"Whilst some E&P companies have been involved in the auctions for new exploration rights during the first half of 2012, the fee-based service contracts on offer by the Government of Federal Iraq, rather than the production sharing framework, have discouraged many investors who have been required to price in additional risk as seen in the fourth Iraq licensing rounds in May 2012.

"Contracts on offer by the KRG that require more development expenditure are offering production sharing arrangements which are attracting more interest, although there is pressure from Baghdad on IOCs and super-majors from operating in Kurdistan; however, this has not prevented ExxonMobil, Total, Gazprom and Chevron from entering into such agreements.

"Although Iraqi oil is generally regarded as ‘Easy oil’ (low cost to produce), IOCs have been reluctant to commit to costly exploration projects on the terms on offer, especially as a Federal Oil Law has yet to be ratified and adopted.

"Recent press coverage about Exxon Mobil’s intention to leave the giant West Qurna-1 project in Federal Iraq is conceivably a result of less attractive terms currently on offer."

Please click here to download the full report.

(Source: Deloitte)