Reliance wants exit from two Kurdistan blocks

Vol 15, PW 13 (12 Jan 12) People & Policy

In public Mukesh Ambani-controlled Reliance might issue a denial but it seems the company wants to exit two exploration blocks in Iraq’s semi-autonomous Kurdistan region.

A well-placed source tells us Reliance plans to quit its Sarta and Rovi blocks, each measuring approximately 100-sq km and located in the oil-rich region, home to Iraq’s historically persecuted ethnic Kurdish minority. “Reliance has told the Kurdistan government it wants to relinquish both blocks,” he says.

“It has yet to make a formal request but this will be done soon.” Reliance, adds our source, is looking to sell its 80% stakes in both blocks.

Over the past few months, it has offered these stakes to Austrian partner OMV and other exploration companies operating in the region like Talisman Energy, Hunt Oil, Murphy Oil, PetroQuest, and Repsol. “None of them has shown any interest,” we hear.

If the rumours of Reliance’s exit are true, it can write off the $50m ‘bonus’ it paid to the Kurdistan Regional Government when it first won the blocks in 2006. “Reliance has spent another $35m at each block till date,” we hear.

Reliance completed its commitment to drill one exploration well at each block last year in line with the PSC. “Reliance drilled a 'dry' well at Rovi,” we learn.

“It had better luck at the Sarta well which ‘indicated’ some ‘heavy oil’ with an API of 10 degrees, but not enough to be ‘commercially’ rewarding.” Reliance signed PSCs on December 22, 2006 and originally operated both blocks with a 100% stake.

But it later offloaded 20% to OMV in November 2007, and the transaction was formally concluded on August 1, 2010. When contacted, a Reliance spokesperson denied rumours that it wants to exit the Kurdistan blocks.

“Who said that” he asked. “There’s no truth in these rumours!”