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Gulf Keystone gets Iraq Kurdistan government OK for PSC changes

https://www.chemnet.com   Aug 10,2010
The UK's Gulf Keystone said Monday Iraq's Kurdistan Regional Government and all other parties had approved and executed amendments to respective production sharing contracts giving it a 100% stake in Gulf Keystone Petroleum
International effective August 1, 2010.


GKPI was established as a 50:50 joint venture between Gulf Keystone and ETAMIC, a private investment fund based in the Middle East, after the latter
successfully negotiated a stake in Kurdistan's Sheikh Adi and Ber Bahr production sharing contracts in July last year.


However, following a material default by ETAMIC, Gulf Keystone said March 10 it was negotiating to pay the KRG the $40 million infrastructure support payment owed by ETAMIC in return for full control of GKPI and its 80% interest
in Sheikh Adi and 40% stake in Ber Bahr.


The KRG would also be entitled to receive an additional infrastructure support payment to be allocated to social programs, amounting to 40% of GKPI's entitlement to profit petroleum derived from GKPI's share of profits in all
four of its PSCs.


The proposal required a net total expenditure by Gulf Keystone of $52 million, resulting in its stake in the Sheikh Adi field increasing from 40% to 80%, while the Ber Bahr stake would double from 20% to 40%.


The KRG owns the other 20% in Sheikh Adi. It also owns 20% of Ber Bahr, with the remaining 40% held by Turkey's Genel Enerji.


The impact would also be felt in Gulf Keystone's two other Kurdistan fields, with its interest in Shaikan climbing from 37.5% to 75% and in Akri-Bijeel from 10% to 20%.


Gulf Keystone said in a statement these proposals have been documented in a series of amendments to each of the four PSCs that have been approved by the
KRG, GKPI and the partners in each of the four PSCs.


In the case of the Shaikan Block and Akri-Bijeel Block PSCs certain Third Party Rights have been modified, including revising payment dates for infrastructure support to be fully payable on August 15, extending the period
the KRG may exercise a third party participation to June 30, 2011 and clarifying the existing Ber Bahr capacity building payment of $10 million is
now due on declaration of the first commercial discovery.


"We regard this as an excellent outcome for our shareholders who have secured a substantial uplift in exposure to outstanding resources and highly prospective pre-drill acreage from the net expenditure of $52 million, which
will be made out of the proceeds of the recent successful equity fund raising
of $165 million," said Gulf Keystone CEO Todd Kozel.


"Additionally the company enjoys a much simplified ownership structure for its assets and full alignment with its regional partner."


The AIM-listed Gulf Keystone is an independent oil and gas company focused on exploration in Iraq's Kurdistan region.
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