The Kurdistan Regional Government of Iraq (KRG) and the Pearl Consortium have agreed to fully and finally settle all their differences amicably by terminating the arbitration and related court proceedings over the Heads of Agreement (HoA) on Khor Mor and Chemchemal fields, a statement said.
Under the deal, Pearl Consortium, comprising Dana Gas, Crescent Petroleum, and Pearl Petroleum, will immediately receive from KRG $600 million. The KRG will also immediately pay Pearl a further $400 million to be dedicated for investment exclusively for the further development to substantially increase production.
The balance of sums awarded by a London tribunal ($1.239 billion) is no longer a debt owed by the KRG and will be reclassified as outstanding cost recoverable by Pearl from future revenues generated from the HoA areas, the statement said.
The parties will also proceed immediately with further development of the world class resources for mutual benefit as well as the benefit of the people of the Kurdistan Region and all of Iraq.
Pearl will increase gas production at Khor Mor by 500 MMscf/day, a 160 per cent increase on the current level of production. The additional Gas, together with significant additional amounts of condensate, is expected to begin production in approximately two years.
The profit share allocated to Pearl from future revenues generated from the HoA areas are adjusted upwards to a level similar to the overall profit levels normally offered to IOCs under the KRG’s production sharing contracts, the statement said. This adjustment reflects the larger investment risks and costs involved in the development of natural gas resources compared to oil developments.
After the recovery of costs and a return on investment by the consortium, 78 per cent of revenues generated from the HoA areas will be for the account of the KRG, and 22 per cent for the account of Pearl, the statement added.
The parties also have clarified the Khor Mor block boundary coordinates and the KRG has awarded the consortium investment opportunities in the adjacent blocks 19 and 20, and added these to the HoA areas, with commitments by the consortium to make appraisal investments on these blocks, and developments if commercial oil and gas resources are found, it said.
The KRG will purchase 50 per cent of the additional gas on agreed terms to boost the gas supply to power generation plants in the Kurdistan Region. The other 50 per cent of the additional gas (250 mmscf/d) will be marketed and sold by Pearl to customers within Iraq or by export, or can be sold to the KRG as well to further boost power generation within Iraq.
Dr Ashti Hawrami, Minister of Natural Resources of the KRG, said: “The companies’ investment and production to date has already delivered substantial benefits for the Kurdistan Region through enabling cost-effective power generation. We are delighted by the outcome of this settlement which opens a new chapter in the relationship between the parties and will take the development of the important natural gas sector to new heights.”
Mr. Majid Jafar, CEO of Crescent Petroleum and managing director of the board of Dana Gas, added: “We have always expressed our commitment to amicable resolution of matters to enable proper development of the Khor Mor and Chemchemal fields. We are pleased with this definitive agreement which follows constructive dialogue with the KRG and promises to generate significant value for all concerned. The settlement of all debts and restoration of full cooperation gives a positive outlook for further investment and full realization of the enormous resource potential of the HoA areas.”