Petroceltic & Hess Corporation Joint Venture in Iraq

Source: www.gulfoilandgas.com 7/27/2011, Location: Middle East

Petroceltic International plc, the AIM and ESM listed oil and gas exploration and production company focused on North Africa, the Middle East and the Mediterranean, is pleased to announce that, in partnership with Hess Middle East New Ventures, a subsidiary of Hess Corporation (Hess), it has executed two Production Sharing Contracts (PSCs) with the Kurdistan Regional Government of Iraq (KRG). The PSCs are in respect of the Dinarta and Shakrok exploration blocks ("Dinarta" and "Shakrok") in the central north of the Kurdistan Region of Iraq.

- Dinarta
Dinarta is a highly prospective undrilled block in a proven but largely unexplored area along trend from existing discoveries in the Kurdistan Region of Iraq. The block, which covers an area of 1319 sq km, is located approximately 75 kms north of Erbil and along trend from the significant Shaikan, Atrush and Swara Tika oil discoveries. The block itself contains a number of identified surface structures, the largest of which, the Chinara Anticline, is 25 kms along strike from the Swara Tika-1 well, currently reported to be testing a significant new oil discovery. The other structures on the block also have significant potential surface closure areas with multiple reservoir targets believed to be likely to be present in the Jurassic and Triassic strata preserved in this block. The resource potential of the identified structures is considered by Petroceltic to be very significant.

- Shakrok
Shakrok is a highly prospective undrilled block in a proven but largely unexplored area along trend from existing discoveries in the Kurdistan Region of Iraq. The block, which covers an area of 418 sq km, is located approximately 50 kms north east of Erbil and is along trend from the nearby Taq Taq oil field and the recently announced Bina Bawi oil discovery. The block itself contains significant surface anticlines, and, similar to Dinarta, multiple reservoir targets are believed to be likely to be present in the Jurassic and Triassic strata preserved in the block. The resource potential of the identified structures and the Shakrok Anticline in particular is considered by Petroceltic to be significant and in line with other discoveries that have recently been made in the region.

- PSC Commitments and Work Programme
Each PSC has an initial 3-year exploration period during which the joint venture plans to acquire 2D seismic and drill a minimum of one exploration well. Based on the anticipated work programmes, Petroceltic’s total financial commitment during the first licence period is expected to be approximately $72 million, the majority of which will be incurred over the next 6 months. These amounts are inclusive of all signature and capacity building bonuses payable to the KRG under the terms of the PSC's. Petroceltic holds its 16% participating interest (20% paying interest) in the PSCs, through a wholly owned subsidiary, Petroceltic Kurdistan Limited (PKL). Both blocks will be operated by Hess and the KRG has a carried interest of 20% in each PSC through all phases of operations.

Commenting today, Brian O’Cathain, Chief Executive of Petroceltic, said: “The signature of the Dinarta and Shakrok PSCs represents Petroceltics entry into an exciting new region and with an outstanding partner in Hess. These highly prospective blocks add further high impact exploration potential to our portfolio and complement our ongoing exploration and appraisal activities in Algeria and Italy.

While significant discoveries have already been made, the Kurdistan Region of Iraq remains, a vastly under explored area with huge potential. Our exploration activities in the region are already progressing and we plan to open an office in Erbil in the coming months. We have worked closely with the KRG and our co-venturers Hess to conclude these agreements, and are now delighted to have signed the PSCs. We are committed to continuing to work closely with the KRG to maximize the value of these blocks for both the Government and people of the Kurdistan Region of Iraq, and our shareholders.”


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