The Pearl consortium, which is led by the UAE's Dana Gas and its parent Crescent Petroleum, will invest more than $700 million in Kurdistan as part of a sales agreement and expansion plans for their fields in Iraq's semi-autonomous region.
The consortium signed a 20 year gas sales agreement with the Kurdistan Regional Government for the sale and production of gas from the Khor Mor and Chemchemal fields, the two companies said in a joint statement on Wednesday.
The two parties will boost their gas production by 63 per cent or 250 million standard cubic feet per day to 650 million scf/d by 2021, and later to 900 million scf/d by 2022, they said.
“This gas sales agreement opens a new chapter in the expansion of the Kurdistan Gas Project that will see a further investment of over $700 million in coming years to expand production up to 900 MMscf/day, further fuelling the region’s economic growth and development," Majid Jafar, the chief executive of Crescent Petroleum and board managing director of Dana Gas said.
Sharjah-based Dana Gas, which operates in Iraqi Kurdistan and Egypt, swung to a net loss for the full year 2018 as impairment charges related to maturing assets hurt profitability. However, the energy firm’s Kurdish assets performed reasonably well over the last years following a de-bottlenecking scheme, which boosted gas production and revenues.
Dana Gas chief executive Patrick Allman-Ward said continuing receipts from the Kurdish Regional Government meant the company was committed to investing in its assets in the region.
"The continuing receipt of payments in a timely manner gives confidence for our continued investment commitment as we enter our second decade of production,” he said in a statement.
In 2017, the consortium came to an agreement with the KRG to settle past receivables and vowed to continue investing in the region, particularly in the Khor Mor and Chemchemal fields, through the addition of gas processing and liquid extraction facilities.
Total investment in the Kurdish gas scheme so far has exceeded $1.6bn, with total cumulative production of over 260 million barrels of oil equivalent, the companies said in a statement.
The project had led to the delivery of "billions of dollars in fuel cost savings” with wider economic benefits for the autonomous region and Iraq as a whole.
"That impact will continue to grow as production capacity expands in the coming years,” the consortium said in a statement.
Around 250 million cf/d of the additional production will be absorbed domestically to meet power demand while the remainder will be targeted for export either to Turkey or to the Iraqi federal government, Mr Allman-Ward said in an earlier interview.
Dana Gas plans to bridge a gap in transportation to Turkey by employing a common used pipeline operated by Russia’s Rosneft or building its own infrastructure to link around 100 kilometres from the capital Erbil to the border.
The company is also eyeing potential development of a massive gas resource base in Egypt, which could require up to $5 billion in investment. Dana Gas will drill the first exploration well in the Block 6 offshore area in April, which could hold up to 20 trillion cubic feet of gas. The cost for the initial exploration well was $59m. Should the reservoir prove successful, the company would invite partners to join the development, for which a final investment decision could be taken around 2023.