The excitement around Gulf Keystone Petroleum (LON:GKP) has been immense ever since it struck oil on the Shaikan block in Kurdistan. Following a busy year with drill bit there is little doubt now the group is sitting on a world class discovery. Emerging now is the huge potential of its other projects in the region.
GKP : 2011 has been a year full of news for Gulf Keystone. We continued to focus on our operations across four blocks in the Kurdistan Region of Iraq while progressing our gradual exit from Algeria.
In Kurdistan, we announced two significant upgrades of resource estimates for our world-class discovery at Shaikan. As of November 2011, the revised gross oil-in-place volumes for the Shaikan discovery, as calculated by Dynamic Global Advisors, our independent Houston-based exploration consultants, are a P90 value of 8 billion barrels to a P10 value of 13.4 billion barrels of oil-in-place with a mean value of 10.5 billion barrels.
It is important to remember that from discovery in August 2009 to today, the estimated size of Shaikan has grown considerably and that these recent resource estimates are supported by independent third party evaluations. Shaikan’s growth will continue as further wells are drilled and deep prospects are de-risked.
Many of your readers are familiar with Gulf Keystone’s story of success in Kurdistan. This story can be summarised in four key points:
- Gulf Keystone has discovered multi-billion barrel resources in the Kurdistan Region of Iraq.
- In addition to already discovered resources, Gulf Keystone believes in the company’s high-probability exploration prospect inventory, which includes all the four blocks in which we have a working interest and two out of which we operate.
- Gulf Keystone is on a clear path of significantly increasing current test output levels, move to commercial production which will exceed 400,000 bopd from the Shaikan field in the future.
- Gulf Keystone has a proven operating capability in the region and a leading Kurdistan brand.
In terms of completed or current exploration and appraisal wells, Gulf Keystone, with our ten wells and three operated rigs, is the third leading operator in the Kurdistan Region of Iraq (after DNO and Genel Energy). The company has about 700 personnel working in the region.
Q: What do you think will be the decisive factors in confirming and cementing Kurdistan’s status as a major region for oil exploration and production?
GKP: Kurdistan is an undiscovered prolific oil province where discovery success rates have exceeded 70 per cent and where Gulf Keystone has an interest in four adjacent and on trend blocks of Shaikan, Sheikh Adi, Ber Bahr and Akri-Bijeel.
For comparison, the nearby Kirkuk field has produced over 20 billion barrels since 1934. Gulf Keystone’s two exploration wells Shaikan-1 and Bijell-1 resulted in two discoveries and we believe that a discovery at the Sheikh Adi block is imminent, while eagerly anticipating first results from the Ber Bahr-1 exploration well.
We have always said that Shaikan is just the start. Gulf Keystone’s high impact exploration and appraisal drilling campaign, planned and funded through 2012, will target additional billions of barrels of prospective resources across the four blocks. We look forward to drilling the Shaikan-7 exploration well in 2012, which will target the lower Triassic and the Permian, which is the deepest undrilled horizon for the company to date.
Q: Explain the potential significance of Ber Baehr for those unfamiliar with this facet of the GKP story.
GKP: We believe that Ber Bahr is a low risk and high impact structure with multi-billion barrel potential. It is on trend with Shaikan, which is our world-class discovery, and close to existing and proposed export routes. Genel Energy, the operator of the Ber Bahr block, spudded the first exploration well in October 2011 and we are eagerly anticipating first results from Ber Bahr-1 early in 2012.
Q: You raised $200 million via a share placing that underlined the interest in the GKP. How long will these funds last, and how might you raise alternative sources of finance?
GKP: Gulf Keystone has raised funds in 2010 and 2011. As a result, our high impact exploration and appraisal drilling campaign is planned and funded through 2012.
Q: Earlier this year you announced plans to sell your stake in Akri-Bijeel. Has there been much interest?
GKP: We are making progress with the preparatory work to implement the announced intention to seek a buyer for the company’s 20 per cent working interest in the Akri-Bijeel block.
Q: You are now producing significant quantities of oil from Shaikan, some of which is being sold into the domestic market. You had plans to export oil. What is the current status of those plans?
GKP: In November, we recommenced sales of the Shaikan crude produced at the extended well test facilities into the domestic market. We are currently selling between 1,500 bopd and 2,000 bopd and this initial rate will increase significantly once the ongoing upgrade of the existing facilities has been completed next year.
This upgrade will also allow us to produce oil meeting export oil specification and, therefore, ramp-up our export operations. In addition, we plan to design and construct Shaikan-2 additional EWT facilities, which will allow us to increase our extended test output to 30,000-40,000 bopd.
Q: What lies ahead of Gulf Keystone in 2011?
GKP: Our plans in 2012 include the completion of the Shaikan appraisal programme and drilling of the Shaikan-7 exploration well, increase the Shaikan extended well test output to 30,000-40,000 bopd, continue work on the Shaikan field development plan and Shaikan export pipeline, progress the exploration activities on the Sheikh Adi, Ber Bahr and Akri-Bijeel blocks, move to the premium listing on the London Stock Exchange.