Gulf Keystone Petroleum
Issue 10 2010
Oil be there
Emerging from the successful US onshore company Texas Keystone Inc when its founder Todd Kozel wanted to expand internationally, Gulf Keystone Petroleum (GKP) is an oil and gas exploration firm operating in the Middle East and North Africa regions. It is currently involved with one of Iraq’s largest oil discoveries in recent years near Erbil, in the Kurdish region of Iraq.
After Todd Kozel incorporated GKP in Bermuda during 2001, the company’s first base of operations was in Algeria where it was responsible for eight blocks and three fields during its time there. This included the GKN and GKS oil fields in the north, as well as the Hassl Ba Hamou gas field in central Algeria that became one of the company’s most prominent projects. In excess of 18,400 square kilometres was explored and appraised by GKP before the company decided to exit Algeria in 2009, setting its sights instead on the Iraqi region of Kurdistan.
Finance director for GKP, Ewen Ainsworth, discusses the company’s short history in Kurdistan in greater detail: “We acquired our first assets in Kurdistan after a period of working with the regional government, helping to evaluate and establish acreage and formulate its oil and gas framework. This led to us applying for acreage there and quickly being awarded our first two production-sharing contracts in November 2007. Our partner in these agreements is the Hungarian company MOL. Subsequently, we drilled our first well Shaikan-1 during 2009, and that discovery was possibly the biggest of the year if not of the last five years.”
Shaikan-1 is located northwest of the city of Erbil, and drilled down to a depth of 2,950 metres, and discovered in excess of a 1,000 metre gross oil column of which less than 30 per cent has been tested with cumulative rates in excess of 20,000 barrels of oil equivalent (BOE) per day. An extended well test is currently being set up and is expected to deliver 8,000 to 10,000 barrels of oil per day (BOPD), which the company will then sell in the domestic market. The three other locations being explored are Akri-Bijeel, Sheikh Adi and Ber Bahr, all of which are in relatively close proximity to one another and if oil is discovered in each and proven to be contiguous would suggest a huge field.
“We are beginning to feel that the acreage we have could be similar to the Kirkuk field,” Ewen comments. “That’s one of the largest oil fields in or around Kurdistan and has become a sort of ultimate prize. We’re not saying this is as big as that at this stage but there is definitely a case for a significant oil accumulation over a very large area. The Kirkuk field is an enormous area discovered in the early part of the 1900s with an estimated 60 billion barrels of oil in place and today continues to produce close to 400,000 BOPD. Other than this field, however, the region has until fairly recently seen very little exploration and drilling due largely to political factors and this was one of the major attractions for GKP to move into the area. With the local economy growing, meaning equipment and support services are progressively more easily acquired and because investors see Kurdistan as a viable opportunity, this essentially green field location presents the company with plenty of exciting prospects.
One of the biggest advantages GKP has with the Kurdistan area is the relationship it has with prominent figures of the region. The company’s country manager for Kurdistan is Adnan Samarrai who joined the company in 2006 sometime after leaving his position as chief exploration geologist for the Iraq National Oil Company (INOC). With his experience in this position, and because Adnan has spent much of his life living in Iraq, his knowledge has been of great benefit to GKP.
The other important figure is Dr Ashti Hawrami, Kurdistan’s minister for natural resources with whom the Company has formed a good working relationship. When GKP was first floated on the London Stock Market in 2004, a Competent Person’s Report was required as part of the listing process and a company that was associated with Dr Hawrami undertook this work at that time. The Company later became involved in the early stages of Kurdistan’s oil and gas regime, and this combined with the encouragement and support of the natural resources ministry and the tremendous opportunities in the region meant GKP felt comfortable with the associated risks.
Though the Algerian permits are still retained GKP is in the process of undertaking an orderly exit so that the company can focus its operations entirely on Kurdistan. As Ewen explains, this region is the company’s future: “I think the shear size of discoveries we have made so far in Kurdistan is motivation enough to continue our expansion there. We have an awful lot of financial resources, as well as the technical knowhow and manpower to back that up, and at this point in time it remains our absolute focus. We have enough on our plates dealing with our existing success without trying to handle other parts of the world as well.”
He resolutely concludes with confidence in GKP’s future prospects: “From a strategic point of view, what we want to do is prove up our assets in Kurdistan as quickly as possible. This will hopefully provide a basis for valuing the four production sharing contracts that we currently have well in excess of their current value. That means, firstly, drilling all of the exploration wells and, secondly, following that up with appraisal wells. The Shaikan field alone is a world class discovery so to somehow become distracted from it and go elsewhere is not the right thing to do at this stage.”
Gulf Keystone Petroleum
Services: Oil and gas exploration