Quick Facts
- Crescent Petroleum and its affiliate Dana Gas signed agreements in April 2007 with the Kurdistan Regional Government of Iraq for the development of its substantial gas resources, including the launch of the Kurdistan Gas City.
- Agreements included the development, processing, and transportation of natural gas from the Khor Mor and Chemchemal gas fields, in order to provide natural gas supplies to fuel domestic electric power generation plants near Erbil and Suleymania.
- Gas deliveries to the Erbil Power Station commenced on 1 October 2008 via the 180 kilometres pipeline within a record period of 15 months.
In May 2009, Crescent Petroleum and Dana Gas entered into strategic partnership agreements with OMV and MOL for the joint development of the Khor Mor and Chemchemal Gas Fields. OMV, Austria’s largest listed industrial company, MOL Hungarian Oil and Gas Company, Hungary’s largest listed company, are two of Europe’s most dynamic integrated oil & gas companies and the original architects of the Nabucco gas pipeline project. OMV and MOL each acquired a 10% equity interest in Pearl Petroleum Company Limited, the Company which holds Crescent Petroleum and Dana Gas’ interests in the Kurdistan Region of Iraq. Further, in 2015, RWE, a German multinational energy company headquartered in Essen and listed in Frankfurt, acquired a 10% equity in Pearl Petroleum Company Limited.
The first stage of the Khor Mor Field development involving the hook up, testing and re-commissioning of existing gas wells, acquiring 2D seismic, installing gas separation and treatment facilities and installation of 180kms of pipeline was completed in a record time of 15 months and first gas deliveries to Erbil commenced in October 2008. The gas is pumped via the 180km pipeline to two power plants in Erbil and Suleymania. The pipeline passes close to other gas fields and will have spare capacity to transport additional volumes of gas at a later stage. The second stage involved the installation of a 2-train liquid petroleum gas (LPG) plant, which was completed in 2011. The ultimate gas production capacity of the LPG Plant reached 300Mmscfdl.
In the ensuing 15 years, the gas project has delivered uninterrupted, affordable energy at scale to the KRI, making a considerable impact on the region’s economy, society, and environment. Capital investment in the project’s infrastructure and day-to-day operations has sustained significant economic activity in the KRI. Ultimately, the project’s most significant economic contribution, by far, is the gas provided to fuel the KRI’s electricity grid.
In 2018, Crescent Petroleum and Dana Gas celebrated the tenth anniversary of production operations and in 2019 signed a 20-year Gas Sales Agreement with the KRG to enable production and sales of an additional 250 MMSCF/day to boost local electricity generation, significantly expanding current production (“KM250 project”).
Subsequently in January 2020, a major oil and gas services provider was appointed to lead the engineering, procurement, and construction (EPC) of the first two new gas processing trains at the plant, which together will more than double production capacity, with further plans for a third train to be added within several years. Major works on the project were halted during the COVID-19 pandemic, and resumed in April 2021.
In 2019, Pearl Petroleum signed a 20-year Gas Sales Agreement (“GSA2”) with the Kurdistan Regional Government of Iraq (“KRG”) to provide much needed gas supplies to support domestic electricity generation. In early 2020, Exterran, a leading oil and gas services provider (which was subsequently acquired by Enerflex in October 2022), was appointed to carry out the Engineering, Procurement and Construction (“EPC”) of a 250 MMSCFD gas processing train and provide operations related technical assistance services post hand over of the plant (“the KM250 project”).
Declarations of force majeure were made under the EPC contract and GSA2 over the past few years firstly due to COVID pandemic in early 2020 and then following various security related incidents, the latest being on 26 April 2024 wherein a drone strike took place which resulted in 4 fatalities and 8 minor injuries to onsite personnel.
On 1 May 2024, based upon concrete actions which have been taken by the Government of Iraq and the Kurdistan Regional Government to significantly strengthen defences at the Khor Mor site as well as firm commitments from the highest levels of those authorities, Pearl took steps to recommence production from the Khor Mor field which was fully restored to normal levels on 3 May 2024.
The aforesaid challenges faced by Pearl have impacted the works on KM250 project. The main EPC contractor has declared Force Majeure thus delaying completion of the KM-250 project. On 19 August 2024, Pearl announced that it had formally issued a notice of termination to Enerflex, following numerous performance issues which have arisen during the execution of the contract works. The ongoing impact of these performance issues has materially affected Enerflex’s ability to meet its contractual obligations, leading to unacceptable delays and hindering the progress and timely completion of the Khor Mor gas expansion project (KM250) in the Kurdistan Region of Iraq (KRI).
As a result, Pearl Petroleum has been compelled to intervene directly to ensure the timely and successful completion of the project. To safeguard the interests of Pearl Petroleum, its stakeholders and the people of the KRI, the Company has taken the necessary step of issuing this notice of termination. This action will enable Pearl Petroleum to assume direct control over the remaining phases of the project, ensuring that it is brought back on track and completed in a timely manner.
Concerted efforts are in-hand to establish a new timeline and completion date for the project including careful consideration of multiple external factors. Crescent Petroleum and its partners in Pearl are committed to the resumption of construction activities by Pearl as safely and swiftly as possible.
