Talisman invests in Kurdish Iraq

This is from the Calgary Herald.

These agreements with the Kurdish regional governments are ongoing even though the central government does not recognise them and there is yet no "oil law" Apparently there are other contracts being signed even in the absence of the oil law but almost no publicity is given to this since everyone is supposed to agree that the Iraq war was never about oil. Of course most people realise that it was about oil at least to a considerable degree. The passing of the oil law was one of the great Bush benchmarks but this fact has been quietly shelved. The important things in the US are the upcoming election and the economy.

Tuesday » June 24 » 2008

Talisman heads into Iraq with $300-million stake
Risks of work in Kurdistan 'manageable'

Shaun Polczer
Calgary Herald
Tuesday, June 24, 2008
Despite uncertainty over the future of oil deals in wartorn Iraq, Talisman Energy on Monday said it intends to spend more than $300 million to explore in Kurdistan.
Talisman announced an agreement with the Kurdistan Regional Government to assume a 40 per cent interest in Block K44 in partnership with Calgary-based Western Zagros, which will also hold 40 per cent. The Kurdish government will retain the remaining 20 per cent.
"This is an exciting opportunity in a world-class hydrocarbon basin," said CEO John Manzoni.
"It is a great fit in terms of Talisman's global expertise and the strategic objectives of our exploration program, with the potential to become a core producing area for us."
Talisman plans to spend $80 million on the first block, including past costs and a commitment to drill three potentially high-impact exploration wells.
In addition, Talisman announced an agreement to conduct a seismic survey over a second parcel, Block K39, over two years.
After the initial term, where it expects to spend up to $15 million, it will have an option to take a 60 per cent interest and drill one exploration well.
Western Zagros immediately welcomed Talisman into the fold of Canadian companies in Iraq.
Western Zagros -- formerly part of Western Oil Sands -- was a subject of controversy after it became the first Canadian firm to go there in the spring of 2006 following the American invasion.
"Talisman brings extensive experience in the international arena, operational expertise and financial capability," said Zagros' president Simon Hatfield.
Although the security situation is improving, there is some question of whether the Iraqi central government will recognize deals with western oil majors that have been signed with the Kurdish government.
Negotiations regarding the country's oil law continue as part of its attempts to hammer out a new constitution.
"We recognize that it's an issue," said Talisman spokesman David Mann. "Some political accommodation will be required. But given the amount of time involved, we still have to make a discovery before this all becomes germane."
Mann said Talisman is excited about the potential for large discoveries in Kurdistan, which has several billion-barrel fields.
Although Iraq has 112 billion barrels -- the second-largest conventional oil reserves outside Saudi Arabia -- it is also recognized as one of the least explored oil countries in the world thanks in part to its wars with Iran and then the United States.
Despite the geopolitical situation, Mann said the company has performed a security assessment and thinks it stacks up with other areas in the world that it operates, such as Southeast Asia.
"It's (Kurdistan) not a war zone like the rest of the country. We recognize there are issues, but we've done our due diligence. We think it's manageable."
Alan Knowles, an analyst with Haywood Securities, described the ongoing negotiations between the Kurdish authority and the central government as "a real wild card," but said he expects an amicable outcome for both sides.
Compared to other areas of the country, Kurdistan has been relatively unaffected by the ongoing turmoil in the south, he said.
"Kurdistan just hasn't had the continued unrest other people have had," he said.
"It's not a very expensive entry point into a world-class oil basin. I think it's positive for the company."
Talisman's shares jumped 94 cents on the Toronto Stock Exchange on Monday, gaining four per cent to close at $23.22.
spolczer@theherald.canwest.com
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