In August 2017 Pearl Petroleum reached an amicable settlement of a contractual dispute between the Kurdish Regional Government and Pearl, the key benefits of the deal being:
• The total settlement in favour of Pearl was $2.2 billion, of which Pearl was paid $1 billion in cash and the balance, $1.2 billion, was transferred to petroleum costs, to be recovered through production.
• Of the $1 billion paid in cash, $600 million was disbursed immediately to the shareholders (Dana Gas share was $210 million) and a further $400 million was placed into a reserve account to fund future investment (Dana Gas share was $140 million). When future investment is financed by third-parties, this reserved amount can be returned to shareholders.
Plans now are underway to increase daily production to approach 1 billion scf/d of gas and 35,000 bbl of condensate. This expansion involves the addition of two incremental gas processing trains of 250 MMscf/d each.
Pearl is making good progress on the construction of the first gas train (KM250 expansion project) at the Khor Mor field, the project is scheduled to come on-stream in Q2 2023.
The KM250 expansion involves a total investment of $630 million and will add 250 MMscf/d of gas to the current production. Under a Gas Sales agreement signed in March 2019 with the KRG Ministry of Natural Resources, Pearl Petroleum will sell the additional quantities of gas to supply local power stations with affordable and environmentally cleaner fuel, and further enhance electricity supplies in the region
Some of the other additional benefits from the settlement were as follows:
• Firstly, Pearl was awarded an extension to the Khor Mor block boundaries to encompass the entirety of the field as currently mapped.
• Secondly, the KRG has awarded the Consortium investment opportunities in Blocks 19 and 20 located adjacent to Khor Mor and added these to the Heads of Agreement areas, against commitments by the Consortium to make appraisal investments on these blocks, and to develop if commercial oil and gas resources are found.
• Thirdly, the length of the licenses was extended by 12 years and they now expire in 2049, which importantly gives Pearl sufficient time to fully exploit these assets.
• Lastly there was an advantageous change in the profit sharing arrangement to bring it in line with that received by other international oil companies operating in the region.
Most importantly, however, the settlement has lifted the barrier to investing and growing our operations in the region and allows Pearl to move ahead with developing the Khor Mor and Chemchemal Fields. This activity is already underway.
Despite the challenges that Pearl has faced since the dispute with the KRG began in 2009, a strong positive relationship is once again being enjoyed with the KRG. Throughout periods of non-payment and growing receivables, the arbitration, the geopolitical and security threats from ISIS; the Consortium continued to operate at maximum plant capacity and produce gas for power generation for the benefit of the people of the region. This commitment was a key factor in achieving the settlement agreement and the Company looks forward to working alongside the Ministries and other partners in the years ahead to complete this exciting project to fully develop these world class assets.