Total has become the third supermajor to join the oil industry in the Kurdish region in Iraq, with a farm-in deal for 35% interests in Marathon Oil’s Harir and Safen blocks.
In a statement confiming the transaction, Marathon Oil says its stake in the blocks will be cut to a 45% working interest (56.25% paying).
Marathon will continue to operate Harir and will remain operator for exploration at Safen, with Total handling production and development. The Kurdistan Regional Government continues to have a fully carried 20% interest in each of the blocks.
The move confirms Total’s building interest in the region, where firms can book profit oil, and some of the myriad rumours swirling around the industry about the consolidation of the Kurdish oil sector.
“The interest in Kurdistan is that there are plenty of gas and oil reserves there and contractual conditions are better [than south Iraq],” Total CEO Christophe de Margerie told a press conference back in February.
The Harir block is approximately 174,000 gross acres (705 square kilometers) and the Safen block is approximately 105,000 gross acres (424 square kilometers). Both blocks are located northeast of Erbil.
The central government blacklisted Chevron recently for agreeing to buy 80% interests in two fields owned by India’s Reliance Industries, and ExxonMobil’s decision to take on six exploration blocks in the region is at the heart of a deteriorating political crisis between the central government and its Kurdish regional counterpart.
Censure from the Oil Ministry in Baghdad is likely to follow. Unlike ExxonMobil, Total has a limited presence in Iraq, with an 18.75% interest in the Halfaya field, which recently began production.
Nevertheless, Total is no less protected from the removal of its contract than Exxon. A blacklist would more likely see Total decide sell voluntarily up to operator Petrochina or Petronas, or see Iraq’s South Oil Company agree to take over Total’s interest.
The Kurdish Regional Government has an explicit policy of wanting to see the forty or so oil companies operating in the region cut by half, with larger companies taking over from smaller independents.
“Total confirms its commitment to contribute to the development of the oil Industry in Iraq and is looking for new opportunities,” said the French company in a statement.
“We are pleased to have Total join Marathon Oil in exploring these high-impact exploration opportunities in the Kurdistan Region of Iraq’s world-class hydrocarbon province,” said Annell R. Bay, Marathon Oil’s vice president of global exploration. “This partnership combines the extensive exploration, drilling and completion experience of Marathon Oil and Total to fully evaluate the potential of these two blocks.”
Marathon Oil says a 2-D seismic program on both blocks is ongoing and expected to be completed by the end of the third quarter of this year.
The first exploration well on the Harir block began drilling July 30, 2012 and will be exploring Mesozoic fractured carbonates with main reservoir objectives in the Cretaceous, Jurassic and Triassic formations. The first exploration well on the Safen block is planned for the first half of 2013.
