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Total in the race to Kurdistan with ExxonMobil and Chevron

Total to acquire ShaMaran Taza oil field in Kurdistan

The Canadian ShaMaran Petroleum Corp (ShaMaran) announced this week to have sold its interests to the French major Total  in the Taza oil field in Kurdistan.

Last month Total had signed with the US Marathon Oil Company (Marathon) a Farm-in Agreement to acquire 35% of the working interests in the Harir and Safen Blocks in the Kurdistan region, northeast Iraq.

These moves toward the northern Iraq happens in a context where  Total owns 18.75% working interests in the Halfaya field in the oil and gas rich south of Iraq, in consortium with Petrochina, Petronas, and the National Oil Company (NOC) South Oil Corp.

In the same way ExxonMobil owns shares in the West Qurna 1 oil field in the south of Iraq.

These positions in the South of Iraq had led the Iraqi Government to ask Total and ExxoMobil to freeze or cancel their contracts with the Kurdistan Regional Government (KRG).

In parallel, the Baghdad Authorities and Kurdistan opened intensive discussions about the export and payment of the oil and gas produced in Kurdistan.

Iraq Technical Services Contracts (TSC) against Kurdistan Production Sharing Contracts (PSC)

The origin of these conflicts lie in the difference of contracts proposed by Baghdad and Erbil.

When Baghdad organized the first licences round of the oil and gas fields mostly located in the South of Iraq, all the international oil companies (IOCs) were queuing to buy their stakes.

Confident in their expertise to restore oil and gas production on fast track in the awarded fields, the competition between the IOCs turned fierce in the frame of the unusual Technical Services Contracts.

As a result the winning companies were allowed to spent $ billions in capital expenditure to be compensated by a fixed remuneration fee around or below $2 per barrel.

After the frenzies of the first licenses rounds, the IOCs seem to have measured the size of the blocks on the road to profits so that the last licenses round could not award all packages.

The challenge of the Technical Services Contracts is in the fixed remuneration fee far too low in respect with all the costs to bear and cannot benefit from rising barrel prices.

So with the actual TSCs, the feeling of the IOCs is that all the costs and risks lie on their side while all potential profits go to the Iraq Government.

In Kurdistan instead, the Erbil Authorities proposed classical Production Sharing Contracts (PSC) where the KRG and the companies can share costs, risks and profits attracting more and more companies.

ShaMaran to sell its Taza working interests to Total

ShaMaran is exploring and developing Taza oil field in joint venture with Oil Search Ltd and the Kurdistan Regional Government (KRG) with working interest shared in following:

 – Oil Search from Iraq 60% and is the operator

 – ShaMaran from Canada 20%

 – KRG 20%

 Taza oil field is located 80 kilometers southwest of Sulaymaniyah city in the southern Kurdistan.

The first well Taza 1 was commenced to drill on July 3rd, 2012 and is supposed to take 100 days to reach the oil play at 3,250 meters depth.

Although the drilling operations of the first well Taza 1 are not completed, Total is confident enough in the prospect to buy the 20% stakes of ShaMaran in Taza.

ShaMaran in brief

ShaMaran Petroleum Corp (ShaMaran) was established in British Columbia, Canada, in 1991 under the name of Arauco Resources Corp (Arauco).

After a series of mergers and acquisitions, the company was renamed ShaMaran in 2009.

Today the company is based in Vancouver, BC, Canada, with the primary target to focus on Kurdistan exploration and development.

In 2009, ShaMaran focused on blocks in the Atrush and Taza oil fields as located near by promising oil fields.

Despite the complains of the Iraq Government, Total, as ExxonMobil and Chevron, does not want to miss the opportunity with ShaMaran’s Taza acquisition to be involved in the rising Kurdistan oil and gas exploration and production.

For more information and data about oil and gas and petrochemical projects go to Project Smart Explorer

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