Heritage Oil Limited, an independent upstream exploration and production company, announces that, in accordance with the option outlined in the Production Sharing Contract ("PSC") in the Kurdistan Region of Iraq, the Kurdistan Regional Government ("KRG") has nominated Genel Energy International Limited ("Genel") as the Third Party Participant in the Miran Licence. This right of appointing an additional party to the PSC is included as standard in contracts in the Kurdistan Region of Iraq.
Heritage entered into a PSC with the KRG on 2 October 2007. The contract provided for a third party to hold an interest in the licence during the exploration phase of up to 25%. These rights have now been exercised and Genel will hold a 25% participating interest in the licence with Heritage, the operator, holding the remaining 75%. The KRG-Genel agreement was reached in the last quarter of 2008. The final stage of Genel-Heritage formalities will be completed upon the receipt of approximately $6.7 million in costs incurred by Heritage to 31 January 2009, which will be within 30 days. Genel will fund its share of all future costs from 1 February 2009.
Genel is a Turkish registered company owned by the Cukurova Group which has experience of working in the Kurdistan Region since 2002. The Cukurova Holding Group is among Turkey's largest industrial and commercial conglomerates with numerous investments ranging from automotive, telecommunications, media, textiles, energy, transportation and information technology services.
Within the PSC there was a provision for Heritage to develop, construct, finance and have a joint interest in a 20,000 barrels per day mini-refinery refinery in the Kurdistan Region of Iraq. The financial commitment for Heritage was $140 million, with the KRG and Heritage sharing the burden of all additional costs. In exchange for being released from this commitment, Heritage has agreed to pay the KRG $35 million from future revenue received solely from production from the Miran field.
As announced on 25 March 2009, the Miran West-1 exploration well reached a total measured depth of 2,935 metres. The well encountered oil shows over an interval of 1,100 metres and good quality light, sweet oil was recovered to surface during drilling operations. Evidence from wireline logs and shows whilst drilling indicates the presence of hydrocarbons in the three main producing zones in the region: the Shiranish, Kometan and Qamchuqua reservoirs.
Heritage has commenced testing operations on the Miran West-1 well and will perforate the most highly prospective fractured zones and run a series of drill stem tests (DSTs) through casing over a gross interval of approximately 500 metres. A further announcement will be made when the multi-zone testing programme has been completed, which is expected to be towards the end of April or the beginning of May.
The Miran licence contains two large structures, Miran West and Miran East, which have been mapped from the 332 kilometres of excellent quality seismic data acquired by Heritage between April and June 2008.