Oil Search signs Iraq contract

It has been announced that Oil Search has signed a production-sharing contract in Iraq for an area with potential reserves of 250 million barrels of oil. The company, focused in Papua New Guinea, has secured the rights to the 632 km2 Shakal block, with an 18.75% stake in the venture and a 15 % revenue interest.

Oil Search is hoping the area will be in trend with the Pulkhana oil field, which has proven oil reserves of 300 million barrels.  In the deal with the Khurdistan Regional Government, Oil Search has a seven year exploration period and a 20 year extendable production period.  Work will commence on the project in mid-late 2008 when they will drill two wells to test the Shakal structure.

"Kurdistan is one of the few places left in the world where independent oil companies can capture material exploration positions with large reserve potential and on satisfactory commercial terms," managing director Peter Botten said. "The region is lightly explored and contains some of the most prospective geology in the world."

Iraq is still considered by many majors too high risk for new development. However, Botten feels that the Kurdistan region is safe: "Although Iraq is clearly a high-risk area, the Kurdistan region is regarded as relatively stable from a business and security risk perspective with increasing foreign investment occurring as a consequence."

Oil Search is already active in Iraq, with a 20% shareholding in a company that holds a 50% stake in the Bina Bawi production contract. The hope is the two contracts will make a contribution to the company's production prior to the proposed PNG project in 2013/14.