Norway's DNO buys ExxonMobil's stake in Kurdistan license amid spending boost

Dubai — Norwegian oil and gas operator DNO has bought ExxonMobil's 32% stake in Baeshiqa license in Iraq's Kurdistan region amid plans to boost spending in the semi-autonomous area and speed up production from existing wells in 2021.

DNO's acquisition will double its operated stake to 64%, with the transaction pending government approval, it said in a Feb. 11 statement. DNO plans to continue an exploration and appraisal program on the license, fast-tracking early production after delivering 15,000 barrels of API 40 and API 22 oil for export from the Baeshiqa-2 and Zartik-1 wells, respectively, it added.

"By increasing our stake in the Baeshiqa license now, we demonstrate our belief in its ultimate potential," said Bijan Mossavar-Rahmani, DNO's executive chairman. "Following the stabilization of oil prices and export payments in Kurdistan, DNO is stepping up spending on new opportunities."

DNO, which didn't disclose the value of the acquisition, had bought its first 32% stake in Baeshiqa from ExxonMobil and became operator of the license in 2018. The two remaining partners in the 324 sq km license are TEC with 16% interest and the Kurdistan Regional Government with a 20% stake.

Kurdish payments

KRG payments to international oil companies improved at the end of last year as oil prices hovered above $50/b.

"In December, a plan was put in place by the Kurdistan Regional Government in respect of the Tawke license 2019 and 2020 withheld entitlement and override payments ($259 million DNO share) such that if Brent prices exceed $50 per barrel in any month, one-half of the incremental revenue will be paid by the KRG towards the withheld amounts," DNO said in a separate Feb.11 statement.

DNO also operates the Tawke license, which includes Tawke and Peshkabir fields in Kurdistan, with a gross production averaging 110,300 b/d in 2020, down 11% from 123,940 in 2019. DNO's net production from Tawke and Peshkabir averaged 77,674 b/d in the fourth quarter, down 3.1% from 80,188 b/d in the previous three-month period.

DNO halted all drilling on Tawke license in the second quarter of 2020 amid the pandemic and in June it fast-tracked operations following "stabilization of oil prices and export payments, quickly adding incremental volumes," the company said in the second statement.

EOR project

Also in June, DNO commissioned the Peshkabir-to-Tawke gas re-injection project, the first enhanced oil recovery project in Kurdistan, to unlock additional oil reserves at Tawke and reduce gas flaring and CO2 emissions at Peshkabir.

"In the second half of 2020, DNO captured, piped and reinjected 2.4 billion cubic feet (bcf) of Peshkabir field gas, which otherwise would have been flared, into the Tawke field for pressure maintenance, leading to an estimated 200,000 barrels of incremental oil recovery," it said.

DNO has a 75 percent operated interest in the Tawke and Peshkabir fields with partner Genel Energy holding the remainder.