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.