19 Oct 2017 10:23

Rosneft, Iraqi Kurdistan agree on cooperation at five production blocks, payments estimated at $400 mln

MOSCOW. Oct 19 (Interfax) - Rosneft and the government of the Kurdish Autonomous Region of Iraq have signed documents required to put into force production sharing agreements (PSA) at five production blocks located in the region, the Russian oil giant said in a statement.

The payment for the projects farm-in and geological information for each of the five blocks ranges from $40 million to $110 million and could total $400 million overall, of which $200 million could be compensated by oil produced from the block.

Rosneft will have an 80% stake in the projects. The key conditions of the agreement and basic principles of product distribution are similar to the PSA in Iraqi Kurdistan that were signed by other international oil and gas companies.

The parties agreed to implement a geological exploration program and to start pilot production as early as in 2018. In case of success, in 2021 they plan to start full-field development of the blocks. According to conservative estimates, the total recoverable oil reserves at the five blocks may be about 670 million barrels, Rosneft said.

Iraqi Kurdistan voted for independence from Iraq on September 25, with 92.73% of voters choosing independence. The region's authorities plan to hold presidential and parliamentary elections on November 1. But Baghdad sees the referendum and the upcoming elections as illegitimate.

Rosneft and the government of Kurdistan discussed the possibility of participation in financing the construction of a gas pipeline in the region on September 18. A separate agreement on this project will be signed by the end of this year. The project calls for putting the pipeline into operation and first supplies of gas to domestic consumers in 2019, and the start of exports in 2020, Rosneft said.

In addition, in June Rosneft pledged to develop cooperation with Kurdistan on the monetization of a project to operate an export oil pipeline. Rosneft is getting access to the management of a major regional transportation system with capacity of 700,000 barrels per day, with plans to expand to 1 million bpd by the end of 2017.