The Consortium comprising Bashneft (70%) and Premier Oil (30%) and South Oil Company acting on behalf of the Republic of Iraq signed the exploration, development and production service contract (EDPSC) for Block 12 today in Baghdad.

The obligatory geological exploration programme at Block 12 under the contract includes 2D seismic survey totalling 2,000 linear kilometres and drilling one exploration well. The contract also stipulates that US$ 120 million must be invested in geological exploration under the programme within a five-year period.

If commercial oil reserves are proved, the contract will be concluded for 20 years. The fee for produced oil will amount to US$ 5 per barrel. The payments will start after achieving the 25% level of the expected oil production plateau which will be determined after the end of geological exploration and evaluation of reserves and recorded in the development project approved by the Iraqi Ministry of Oil.

According to the terms of the contract, within a month after the contract is signed, the members of the Consortium will pay Iraqi partners a bonus totalling US$ 15 million on a pro rata basis (Bashneft and Premier Oil will pay US$ 10.5 million and US$ 4.5 million respectively). Besides, under the contract, Bashneft, being the operator of the project, has to set up an office in Baghdad by the end of 2012.

Note: Block 12 is located in the Najaf and Muthanna provinces, approximately 80 km to the southwest from the city of Samawah and 130 km to the west from the city of Nasriya. It is a part of the Western Desert, which is an unexplored region having the greatest potential in Iraq in terms of oil production. The block’s approximate area is 8,000 sq. km.

In June 2012, following the Fourth licensing round, the Iraqi Ministry of Oil granted Bashneft the right to operate hydrocarbon exploration and development at Block 12. At the beginning of August, the Iraqi Ministry of Oil and the Consortium comprising Bashneft (70%) and Premier Oil (30%) initialled the exploration, development and production service contract for Block 12, which was later approved by the Council of Ministers of Iraq.