Genel Energy called its new oil discovery in Iraq’s Kurdistan region “significant.” The reality is that it’s a major find. Chia Surkh, the first of five test wells the company plans to drill this year, confirms the likelihood of extensive reserves lying under the controversial semi-autonomous region.
It also gives the Anglo-Turkish oil-and-gas independent even more confidence in its investment in the region (the company’s revenue for last year’s was $335 million). Investors agree. Genel’s shares, which trade in London, closed up 6.4% on April 10 following the discovery’s announcement.
Chia Surkh was drilled in the southernmost part of the Kurdistan region, along the Iranian border (see map). It produced up to 11,950 barrels of oil a day and 15 million cubic feet of gas in tests extending over several days.
“We intend to carry out a rapid appraisal and development programme and expect to have an early production scheme operating in the first half of 2014,” said Genel’s chief executive, former BP boss, Tony Hayward, happy with both his new find and new life far away from the Gulf of Mexico and the Deepwater Horizon spill (read more: Ex-BP’s Hayward: from the Gulf of Mexico to Kurdistan). He has high hopes that Genel’s other test wells in the area will replicate Chia Surkh’s success.
The well’s discovery comes shortly after the first cargo of Iraqi Kurdistan’s crude oil was sold on the international market, seen as an act of bold disobedience towards the central government in Baghdad. The central government says it alone has the authority to control crude exports, while semi autonomous Kurdistan says its right to do so is enshrined in Iraq’s federal constitution.
Tensions between the Kurds and Baghdad are worse than ever. A month ago, the central government passed its 2013 budget allocating Kurdistan a fraction of the oil revenue expected by the semi-autonomous region, $650 million against $3.5 billion. The Kurds, meanwhile, continue to attract international oil companies to extract the oil.
Genel stays away from the internal politics, in as much as any company can that is the leading independent oil and gas producer in the Kurdistan region, operating or exploring seven fields (see map). The crude that comprised the Kurd’s first international sale was pumped from its Taq Taq oilfield and trucked over Iraq’s northern border to Turkey.
In its 2013 outlook Genel confirmed its desire to build an export pipeline infrastructure in the region. There has been some action. More recently, Hayward said that he expected a pipeline transporting oil from Iraq’s Kurdistan to the Turkish border to be completed by the summer, reports Bloomberg. Genel is likely going to have a lot of oil and gas to ship.