The Korea National Oil Corporation has reported its $400 million investment in Iraqi Kurdistan has failed to yield commercial reserves.Â
In a surprise announcement by the company to a South Korean parliamentary committee, KNOC admits that its interests in Bazian, Sangaw North, Sangaw South, Qush Tappa, and Hawler Area – slated to contain 1.9 billion barrels when the project was announced in 2008 – have been shown to contain little in the way of economically feasible deposits at all, with many wells yielding only water or sub-commercial natural gas instead of crude.
KNOC gave $211.4 million to the Kurdistan regional government after the contract was signed and spent another $188.68 million on drilling.
“This is a typical case of failure in overseas resource development caused by a hurry to achieve impressive results, without a proper feasibility study being done first,” siad Lee Hak-jae, a member of the parliament’s National Assembly Knowledge Economy Committee on Thursday. “We need to thoroughly review all overseas resource development projects.”
The developments serve as a reminder that Kurdistan contains operational and exploration risk, as well as uncertaininty over the legal status of production sharing contracts.Â
