Heritage Oil Corporation has executed a Production Sharing Contract with the Kurdistan Regional Government (KRG) over Miran Block in the south-west of the Kurdistan Region of Iraq and that Heritage will be operating as a 50/50 partner with the KRG to create a 20,000 barrel per day oil refinery in the vicinity of the licence area.
Under the terms of the agreement, Heritage Energy Middle East Limited, a wholly owned subsidiary of Heritage, will serve as operator. Heritage will join the existing and increasing presence of international oil exploration, development and production companies operating in the Kurdistan Region of Iraq.
The licence area is 1,015 square kilometres and encompasses the very large Miran structure. This structure, as expressed at surface, constitutes an area of approximately 500 square kilometres and appears to have three separate culminations. Reservoir potential exists at numerous zones that management estimate could contain in excess of 1 billion barrels of oil. Recent drilling results have demonstrated the enormous potential of this region.
In addition, Heritage has also entered into a strategic agreement with the KRG to establish a 50/50 joint venture company which shall build, own and operate an oil refinery in the vicinity of the licence. The refinery, which should have a capacity of 20,000 barrels of oil per day, is scheduled to be operational to design specification within approximately two years. Heritage is especially pleased to be part of this extremely exciting and profitable project that will create value added petroleum products for the region and all of Iraq.
Heritage will commence geological work immediately, having established its local office in Erbil in 2005, and aims to commence a high-impact exploration drilling program in 2008. Heritage has assembled a highly experienced technical team with considerable experience of the regional geology.
The total contractual financial commitment for the Miran Licence is estimated to be less than US$40 million distributed over the first five year term, which can be extended for a further two years thereafter. The exploration licence will be automatically converted into a development licence on a commercial discovery.
