Production-Sharing Agreement with the Salah Aldeen Governorate to be ratified by Iraq’s ministry of oil
The Salah Aldeen PSC is circa 24,000 km2 comprising the entire area of the governorate of Salah Aldeen in northern Iraq. The Salah Aldeen region is approximately two thirds the size of the Kurdistan region of Iraq and the PSC is modelled on the Kurdish PSC but with superior fiscal terms.
The Salah Aldeen PSC contains a number of existing oil fields, for example Ajeel (427 MMbbls recoverable oil reserves + 3.9 TCF gas). There are additional fields, ie Hamrin and the Tikrit and Balad fields with additional significant reserves. To date production is very limited, only Ajeel has come on stream, with about 3% of reserves produced.
The PSC comprises the entire province, and runs for an initial period of 7 years. The obligatory work commitment during this period comprises acquisition of a 70 km 2D seismic survey ($2 million) and one exploration well ($7 million).
The Salah Aldeen region has multibillion barrel oil potential and is expected to follow the proven success of the Kurdistan region of Iraq over the last 10 years. Only limited seismic has been shot and exploration virtually confined to obvious surface anticlines in the eastern part of the licence, mostly dating from 30 years ago.
Despite several apparently large and commercial discoveries, only limited production has occurred mostly from just one field. Activities over the last 20 years have been regularly disrupted for long periods by political instability and lack of export options.
Fiscal Terms
The main components for oil are:
◦Royalty of 7%
◦Cost Recovery of 60%
◦Profit Oil Share to contractor of:
◦R<1 = 38%
◦1<R< or =2.4 (based on linear scale)
◦R>2.4 = 16%
◦Various bonuses at milestones from 50-150 MMbbls cumulative production.
◦Exploration Period: initial term of 10 years, extendable annually up to a maximum period of 15 years.
◦Development Period: initial term of 20 years following declaration of commerciality, with an automatic right for a 5 year extension.