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Genel secures regional support for Kurdistan field development and acquires OMV assets

13th November 2014

Genel Energy has reached an agreement with the ministry of natural resources (MNR) of the Kurdistan Regional Government (KRG) for the development of the Miran and Bina Bawi gas fields

Genel secures regional support for Kurdistan field development
In addition, Genel has agreed key terms with OMV to acquire its 36 per cent operated stake in the Bina Bawi gas field

“These agreements represent a win-win in the commercialisation of Miran and Bina Bawi,” said Tony Hayward, chief executive of Genel Energy.

“It materially de-risks the value of Genel’s gas business, gives attractive project returns while significantly lowering our capital exposure, and provides revenues from early oil production. For the KRG, it unlocks the Miran and Bina Bawi gas resource and will enable it to satisfy domestic gas demand and its obligations under the KRG-Turkey Gas Sales Agreement.

“We are proud to be playing a key role in the next phase of the development of the KRI oil and gas sector.”

In addition, Genel has agreed key terms with OMV to acquire its 36 per cent operated stake in the Bina Bawi gas field. The total consideration will be USD 150m in cash.

The agreement with the MNR for the development of Miran and Bina Bawi states that the Miran and Bina Bawi fields are to be combined under one Production Sharing Contract (PSC).

This is expected to be approved by year-end 2014.

Following approval, Genel will become the sole contractor and have a 100 per cent equity interest in both fields.

The responsibilities of Genel will be drilling of the gas wells and installation of flowlines and first stage condensate separation at Miran and Bina Bawi. The company will also be responsible for the development of the oil resources at Miran and Bina Bawi

The KRG will assume responsibility for the gas treatment facilities and gas off-take arrangements from the fields.

The tender process for the gas treatment plant will commence in the first half of 2015 and first gas production for export will commence in H1 2018. The KRG also has an option to request gas for domestic consumption commencing in 2016.

Genel’s entitlement will be 100 per cent of oil revenues until all licence back costs are fully recovered. The company’s share of oil revenues will then revert to 50 per cent.

First oil production is expected in 2016.

Genel will also receive 100 per cent of the revenues for condensate extracted at first stage separation and a fee of USD 0.78 per thousand cubic feet for the raw gas delivered into the gas treatment facilities.

The company expects that a final investment decision for the development of the fields will be made in the first half of 2015.

Genel’s current estimate of combined gross mean raw gas resources at Miran and Bina Bawi is 11.4 trillion cubic feet (tcf), which is expected to deliver gross mean sales gas of 8.4 tcf.

Combined gross mean oil resources at Miran and Bina Bawi are now estimated at 34 mmbbls, with combined gross mean condensate resources from first stage separation estimated at 45 mmbbls.

Gross contractor capital investment for oil and gas is estimated at USD 3.3bn, which represents a unit development cost of less than USD 2/boe. Unit opex is estimated at less than USD 1/boe.

KRG will benefit from these agreements through commercialisation of a major onshore, low-cost, gas resource, which will generate significant revenue and value for the people of the Kurdistan Region of Iraq (KRI).

The regional government will also have an option for early gas production into the domestic market, which stands to be an important contributor to industrial and economic growth, as well as the ability to fulfil export commitments to Turkey under the Gas Sales Agreement signed in November 2013.

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