131
rate. The Group estimates that it is currently on schedule and on budget to achieve these production goals. The Group is
committed under the terms of its licence to start a two-year, seven-well drilling campaign, which it started in May 2014.
In addition to this seven well commitment, the Group plans to drill one additional exploration well by the beginning of
2016.
The Siba service contract stipulates that the JV partners must meet a minimum expenditure obligation of $25 million per
field within three years of obtaining approval on the submitted Preliminary Field Development Plan (“
PDP
”). Siba’s
PDP was approved in July 2012. The minimum work obligations for Siba are to: (i) acquire a minimum of 200 km
2
of
3D seismic data over the contract area, including processing and interpretation thereof; (ii) drill one appraisal well and
one exploration well; (iii) perform detailed studies; and (iv) acquire sufficient data for field development planning.
As at the date of this Offering Memorandum, the Group has: (i) completed acquisition of 3D seismic over 280 km
2
, and
made substantial progress on processing this data; (ii) worked over the Siba-1 well and performed initial tests and
analysis; (iii) ordered and received various necessary components and equipment for planned wells, pipeline
infrastructure and gas processing facilities; and (iv) distributed tender materials to invite bidders for construction and
installation of the main gas processing plant.
In addition, the Group is undertaking construction of production facilities comprising (i) flowlines from the Siba gas
field to a central reception and hydrocarbon dew point plant, and (ii) export pipelines, to be completed between 2014 and
2015.
The Group’s committed capital expenditure in relation to the Siba field in 2014 is approximately $156.6 million. The
Group’s committed capital expenditures in Siba in 2015 and 2016 to amount to an additional approximately $129.2
million.
Mansuriya
Mansuriya is a gas field covering a gross area of 150 km
2
and located in eastern central Iraq, approximately 50 km
northeast of Baquba in the Diyala Province, and 100 km northeast of Baghdad. The Group, through Kuwait Energy Iraq
Ltd, holds a 22.5% revenue interest and a 30.0% cost interest in the licence for the Mansuriya field held, through the gas
development and production service contract entered into with the Midland Oil Company. The Group’s JV partners are
Oil Exploration Company (an Iraqi state company), which has a revenue interest of 25%, Korea Gas Corporation, which
has a working interest of 15% and TPAO, which has a working interest of 37.5% and is the operator of the service
contract. The capital and operating expenditure costs of Oil Exploration 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 in respect of the obligations of Kuwait Energy Iraq Ltd under the gas development and
production service contract for Mansuriya.
The service contract is set to expire in July 2031, with the possibility of a 5-year extension subject to agreement by the
Iraqi Ministry of Oil. 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 1,790 meters in the Mansuriya field, as well as the right (and certain
commitments) to explore for undiscovered hydrocarbons in deeper formations within the gas field. Development of any
such undiscovered gas from within the deeper formations for commercial production gas would be subject to negotiation
of a separate contract with the Midland 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 Mansuriya field was discovered in 1979 through the Mansuriya-1 well. Two further appraisal
wells had been drilled by 1985 and 1989 respectively, each proving gas, and a fourth well was drilled in 1990 which
found gas and oil. The Mansuriya field now contains four wells and comprises two main reservoir sections.
As at May 2014, the operator has: (i) finalised its interpretation of available 3D seismic data; (ii) ordered and received
various necessary components and equipment for planned wells; and (iii) technically evaluated EPC contractors for
pipeline, infrastructure and gas processing facilities.
As a result of delay in the development of the field, the original commercial estimate and projections regarding
Mansuriya have proven not to be viable. As a result, the Group is currently seeking opportunities to sell its interest in this
asset or otherwise exit the asset. The Group’s expected capital expenditures in relation to the Mansuriya field in 2014 are
$22.1 million, representing minimum capital expenditures required under the Mansuriya licence.
In June 2014, attacks by ISIS insurgents were reported in the vicinity of the Mansuriya gas field, leading to the
evacuation of the Mansuriya gas field and suspension of the Group’s activities there. Progress on the Mansuriya gas
development project, which had already been subject to numerous delays for operational as well as security reasons,
