The Kurdistan Regional Government (KRG) and Pearl Consortium have signed an deal to put an end to all their disputes by terminating the arbitration and related court proceedings over the Heads of Agreement (HoA) on Khor Mor and Chemchemal gas fields, according to a joint statement
Under the agreement, Pearl Consortium, which includes Dana Gas, Crescent Petroleum and Pearl Petroleum, will receive US$600mn from KRG. In addition, KRG will also pay Pearl a further US$400mn for investment exclusively for the further development to substantially increase production.
The balance of sums awarded by the London tribunal is US$1.239bn, and it is no longer a debt owed by the KRG and will be reclassified as outstanding cost recoverable by Pearl from future revenues generated from the HoA areas.
The parties will be proceeding immediately with further development of the world class resources for mutual benefit as well as the benefit of the people of the Kurdistan Region and all of Iraq.
Pearl will increase gas production at Khor Mor by 500mm scf per day, which is a 160 per cent increase on the current level of production. The additional Gas, together with significant additional amounts of condensate, is expected to begin production in approximately two years.
The profit share allocated to Pearl from future revenues generated from the HoA areas are adjusted upwards to a level similar to the overall profit levels normally offered to IOCs under the KRG’s production sharing contracts, said the statement. This adjustment reflects the larger investment risks and costs involved in the development of natural gas resources compared to oil developments.
The statement further added that after the recovery of costs and a return on investment by the consortium, 78 per cent of revenues generated from the HoA areas will be for the account of the KRG, and 22 per cent for the account of Pearl.
The KRG will purchase 50 per cent of the additional gas on agreed terms to boost the gas supply to power generation plants in the Kurdistan Region. The other 50 per cent will be marketed and sold by Pearl to customers within Iraq or by export to further boost power generation within Iraq.
Pearl will also expand its local training and employment programmes towards achieving maximum localisation and content, as well as supporting local communities through its active Corporate Social Responsibility (CSR) programmes.
Dr Ashti Hawrami, minister of natural resources of the KRG, said that the settlement aims to terminate Pearl Petroleum’s claims against the KRG in an international arbitrary court.
“The companies’ investment and production to date has already delivered substantial benefits for the Kurdistan Region through enabling cost-effective power generation. We are delighted by the outcome of this settlement which opens a new chapter in the relationship between the parties and will take the development of the important natural gas sector to new heights,” he added.
