Gulf Keystone Petroleum, one of the pioneers of oil exploration in the Kurdistan region of northern Iraq, is targeting production of 150,000 barrels of oil per day (bopd) by 2015 from its Shaikan discovery (Gulf Keystone 75 per cent interest as operator). That huge production target is supported by equally impressive estimates of the volume of oil held within Shaikan’s reservoirs. That estimate increased by 83 per cent in July when an evaluation by Dynamic Global Advisors reported a new range of 12.4bn barrels (P90) to 15.0bn (P10) barrels, with a mean value of 13.7bn barrels.
The oil-in-place estimates are based on the completed five-well appraisal programme, following which Gulf Keystone declared the Shaikan discovery to be commercial. The company has since started drilling Shaikan-8, its first ‘post-appraisal’ well, and aims to submit a field development plan for the Shaikan field by January 2013.
The company has nearly completed construction of two new early production facilities, with the first unit due to become operational in January 2013 and the second by the end of March 2013. These two early production facilities should enable production to increase to 30,000 to 40,000 bopd by mid-2013. Following the completion of preliminary design work, the company is now awaiting confirmation of the final route of the export pipeline to enable it to export growing oil output from Shaikan.
Shaikan is one of four projects that Gulf Keystone has in progress in Kurdistan. While Shaikan is the clear flagship, the company continues to explore and appraise the Akri-Bijeel, Sheikh Adi and Ber Bahr blocks to prove up a substantial resource base. Gulf Keystone is also evaluating the ongoing process to sell its 20 per cent interest in the Akri-Bijeel block.
Production of 150,000 bopd is substantially beyond the scale of a company with shares listed on London’s junior (secondary) market, the Alternative Investment Market (Aim). Gulf Keystone accordingly proposes to graduate its shares from Aim to London’s main market in due course. What’s more, the development of a field of the scale of Shaikan is substantially beyond what might be expected of a junior independent, which keeps a takeover of Gulf Keystone a realistic possibility.
While the undoubted oil potential of Kurdistan is increasingly attracting major oil firms, smaller players such as Gulf Keystone still have an important role to play, and its shares remain attractive.
Policy adviser the International Energy Agency (IEA) forecasts that crude oil production from Iraq, incorporating Kurdistan, is set to increase by 1.87m barrels per day (mbopd) between 2010 and 2016. That would lift Iraq’s total output to 4.36 mbopd, which is 0.34 mbopd higher than predicted in the IEA’s previous outlook. Growth of this level could temper some of the fears in oil markets generated by Iran’s continued sabre-rattling and the possibility of a unilateral military strike by Israel.
The increase in expected Iraqi output reflects good progress being made on the country’s dozen joint ventures with major energy groups. But the IEA warns that the withdrawal of US troops and increase of insurgency bombing could threaten Iraq’s ability to realise its full hydrocarbon potential.
The revised forecast could see Iraq account for 80 per cent of the increase in production capacity from the Organization of Petroleum Exporting Countries (Opec) over the six years to 2016. Over that time, Opec’s capacity is set to increase by 2.33 mbopd to 38.1 mbopd, representing some 37.5 per cent of global capacity in 2016.