DNO International, the Norwegian oil and gas company, announced today that it has reached agreement with the Kurdistan Regional Government (KRG) to fully apply the fiscal terms and conditions of the existing Production Sharing Contract (PSC) covering its Tawke license in future.
The agreement replaces temporary terms set down since DNO started operations at Tawke in 2004.
“We are very pleased with this outcome and the overall trend towards normalisation,” said Bijan Mossavar-Rahmani, DNO’s Executive Chairman.
“The previous ad hoc arrangements put in place by the KRG provided us tremendous support during difficult and uncertain periods and allowed us to continue our investment programs,” he added. “But now that we are firmly established, our shareholders benefit from greater clarity and transparency as to the status of the Tawke project and our other investments in the Kurdistan Region of Iraq.”
The agreement also provides for a reconciliation of past accounts and application of contract fiscal terms from inception until 1 June 2012.
As a result of this reconciliation, DNO International will hand eight weeks of oil from its stake in the field to the KRG for local consumption. Overall revenues for the year will remain unchanged.
DNO says the reconciliation calculations do not include payments not yet received for exports through the Iraqi pipeline system in 2009 and again in 2011-12. DNO was given part payments by the KRG, after a temporary deal with Baghdad was struck under which the central Oil Ministry reimbursed companies in the region for capital spent at Kurdish fields.
The deal has disintegrated, with the KRG discontinuing all exports via Iraq’s central pipeline until payments made under the so-called Erbil Agreement are made.
When those payments are made, DNO says it will receive its pro rata share as provided for under the PSC.
DNO is targeting production capacity of 100,000 barrels a day at Tawke by the end of the year. The company operates the field with a 55% gross working interest.
