Dragon Oil (LON:DGO) today took another step towards diversification as it secured a new exploration project in Iraq.
This morning it revealed that it is part of a consortium that has been awarded the rights to Block 9, in the Basrah Province of southern Iraq. This was part of Iraq’s fourth bidding round.
The firm’s flagship asset is the highly cash generative Cheleken oil field in the Caspian Sea, where it is scaling up production to 100,000 barrels a day by 2015. And in recent months it has been assessing several opportunities to expand its business into new areas.
“Entry into Iraq has been under consideration for some time and so represents a strategic move for Dragon Oil,” said chief executive Dr Abdul Jaleel Al Khalifa.
It will be a joint venture with Kuwait Energy (operator, with 40 per cent) and Turkish Petroleum Corporation (owning 30 per cent). Dragon will own 30 per cent of the venture.
And unlike contracts awarded previously by the Iraqi government this is for exploration acreage rather than existing oil and gas fields.
Dragon revealed that the consortium will have five years to assess whether or not Block 9 can be developed into a commercial oil field. If successful the consortium can then apply for a 20-year development licence.
Through the terms of the contract the consortium will receive US$6.25 per barrel of oil equivalent.
“This was an exploration bid round and, consequently, this award leading to a long-term partnership with Iraq for the exploration of their natural resources represents a milestone for Dragon Oil's exploration strategy in this country.”
He adds: "We look forward to working closely with our joint venture partners to apply our experience and technology in Iraq.
“Today's announcement marks a significant achievement towards the diversification of our asset portfolio for Dragon Oil."
More to follow ...