130
May 2014, the Group’s estimated 1P condensate reserves in Iraq totalled approximately 2.4 mmboe, its 2P condensate
reserves in Iraq totalled approximately 6.0 mmboe, and its 3P reserves totalled approximately 7.7 mmboe.
According to GCA’s report, the Group’s Iraqi assets include 250.0 mmbbl of 1C (low estimate), 700.8 mmbbl of 2C
(best estimate), and 1,613.8 mmbbl of 3C (high estimate) contingent oil resources on a working interest basis as at 31
May 2014, all of which are located in Block 9. The Group’s Iraqi assets also include 255.8 Bscf (42.6 mmboe) of 1C
(low estimate), 697.6 Bscf (116.3 mmboe) of 2C (best estimate) and 1,649.9 Bscf (275.0 mmboe) of 3C (high estimate)
contingent gas resources on a working interest basis as at 31 May 2014, of which: 237.2 Bscf (39.5 mmboe) of 1C (low
estimate), 609.5 Bscf (101.6 mmboe) of 2C (best estimate) and 1,442.7 Bscf (240.5 mmboe) of 3C (high estimate) are
located in Block 9; 18.6 Bscf (3.1 mmboe) of 1C (low estimate), 37.2 Bscf (6.2 mmboe) of 2C (best estimate) and 125.0
Bscf (20.8 mmboe) are located in Mansuriya; and 50.9 Bscf (8.5 mmboe) of 2C (best estimate) and 82.2 Bscf (13.7
mmboe) of 3C (high estimate) are located in Siba. The Group’s Iraqi assets also include 3.4 mmboe of 2C (best estimate)
and 6.5 mmboe of 3C (high estimate) contingent condensate resources on a working interest basis as at 31 May 2014, of
which 3.3 mmboe of 2C (best estimate) and 5.7 mmboe of 3C (high estimate) are located in Siba and 0.1 mmboe of 2C
(best estimate) and 0.8 mmboe of 3C (high estimate) are located in Mansuriya.
The Group is engaged in active negotiations to farm out a portion of its working interest share in the Block 9 licence and
expects to conclude an arrangement by the end of 2014. If such a farm out arrangement is entered into, the proportion of
the Block 9 contingent resources in the CPR that are attributable to the Group will be reduced accordingly. Under the
terms of the Block 9 licence, the other parties to the licence will have a right of first refusal to acquire the working
interest that is subject to any proposed farm out. See “
Risk Factors—Risks relating to the Group—The economic
valuations contained in the CPR may not provide an accurate estimate of the value of the Group or its assets
.”
Exploration and appraisal assets
Siba
Siba is a gas field covering a gross area of 200 km
2
and located in southeast Iraq near the city of Basra and the border of
Iran. It lies within a prolific petroleum province that has many oil fields in the vicinity, including the large Zubair and
Rumaila fields. The Group has a 45% revenue interest and a 60% cost interest in the licence over the Siba field, held
through the gas development and production service contract entered into with the South Oil Company, an agency of the
Iraqi Ministry of Oil. A Group company, Kuwait Energy Iraq Ltd, is the operator of the contract and its JV partners are
TPAO, which has a revenue interest of 30%, and Missan Oil Company (an Iraqi state company), which has a revenue
interest of 25%. The capital and operating expenditure costs of Missan Oil Company are “carried” and paid by the other
JV partners in proportion to their revenue interests. Following the KEC Kuwait Restructuring, the Issuer will provide a
performance guarantee of the obligations of Kuwait Energy Iraq Ltd under the gas development and production service
contract for Siba.
The service contract is set to expire in July 2031, with the possibility of a 5-year extension subject to agreement by the
South Oil Company. Under the service contract, the JV partners have the right to produce gas and condensate from all
discovered reservoirs that may exist as deep as 4,165 meters in the Siba field, as well as the right (and certain
commitments) to explore for undiscovered gas in deeper formations within the gas field. Development of any such
undiscovered hydrocarbons from within the deeper formations for commercial production would be subject to
negotiation of a separate contract with the South Oil Company. The JV partners do not have the right to produce any oil
that may be present in the fields.
The presence of gas in the Siba field was discovered in 1969 through the Siba-1 well. By 1993 Siba-1 had achieved a
maximum initial flow rate of 16.95 mmscfd, with 2,650 bcd of condensate. In 2013, the Group re-entered the well and
re-perforated the original zones with the addition of 11 more meters. The well achieved a maximum flow rate of 22
mmscfd and approximately 3,700 bcd. The Siba field currently contains three exploration wells in two principal zones.
Under the terms of the service contract, the Group is responsible for the initial processing of recovered hydrocarbons, to
separate natural gas, LPG and condensate. This initial processing will be performed in facilities constructed and operated
by the Group, and which will be on-site in close proximity to the wells. Hydrocarbons will be transported to the Group’s
central processing facility for the Siba field using a series of flowlines. The Group has awarded UOP a contract to supply
the equipment for this central processing facility, which will have the capacity to process 100 mmscfd. Following the
KEC Kuwait Restructuring, KEC Kuwait will provide a performance guarantee of the obligations of Kuwait Energy Iraq
Ltd under the gas processing facility contract for Siba.
The Group’s activities in Siba are focused primarily on commencing commercial production, in order to attain a daily
average production rate of 50 mmscfd by July 2015 and attain the plateau gas rate of 100 mmscfd by the end of 2015,
with current plans to drill a total of 17 new wells throughout the life of the field to attain and maintain this production
