ShaMaran acquires interest in major Kurdish op

The Kurdistan Regional Government of Iraq and GEP are parties to a Production Sharing Contract (PSC) dated November 10, 2007 in respect of the Atrush Block Oil and Gas Exploration Area located in the Kurdistan Region of Iraq. GEP currently owns 80% of the rights and obligations of the Contractor in the PSC with the Contract Area and the Kurdish Regional Government owning the remaining 20%, ShaMaran said in a statement.

Under the terms of the agreement, ShaMaran BV has acquired 33.5% of the fully-diluted share capital of GEP in exchange for initial cash payments totalling US$24.1 million, 12.5 million shares of ShaMaran, and a future obligation to contribute the next $15.9 million in cash which will be required to fund GEP’s operations (ShaMaran has over $50 million in cash as of date to fund these commitments). Thereafter, each of the shareholders of GEP will fund operations pro-rata according to their participating interest (including its share of the Kurdish Regional Government carried interest).

All of the above mentioned payments, with the exception of the share consideration, will be added to a designated cost pool within GEP, to be repaid to ShaMaran BV out of future oil production which is attributable to petroleum cost recovery under the terms of the PSC.

Pradeep Kabra, President and CEO of ShaMaran, commented, “We are very excited about our partnership with Aspect and the opportunity to participate in one of the most exciting exploration blocks in the Kurdistan Region of Iraq.”

The Atrush block is located immediately north and adjacent to the major new Shaikan discovery announced by Gulf Keystone Petroleum in January 2010. The 2D seismic data over the Atrush Block indicates that the Atrush structure is similar to the Shaikan structure. The Shaikan discovery was announced as multiple stacked oil reservoirs in the Cretaceous, Jurassic and Triassic sections, with reported estimated potential resources between 1.9 billion barrels and 7.4 billion barrels, with a mean of 4.2 billion barrels of oil. The Atrush Block is also adjacent to and on trend with the recent Bijeel oil discovery to the east, operated by Kalegran Limited (MOL).

The Atrush 1 exploration well location has been approved and the well is expected to spud in September 2010. The well (planned depth of 3,100m) is prognosed to encounter the same reservoir sections as Shaikan and will also test the structural extension of the Shaikan discovery into the Atrush block as indicated from the 2D seismic data. Of the 10 expected target reservoirs in Atrush 1, nine were confirmed to be oil-bearing in Shaikan, while the Lower Kurra Chine encountered high pressure gas. There is also additional upside potential in the shallower Cretaceous Qamchuga formation, and the deeper Permian section (not reached in Shaikan), which is also indicated by seismic data to have closure in Atrush, according to ShaMaran.