Iraq Oil & Gas Outlook

MAY 2 0 1 5

C ONFIDEN TI AL
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2
Stability in Iraq can open up world class asset and acreage on revised terms

Iraq has 144bn barrels of oil reserves and yet remains

one of the worlds least explored major producing
country
The giant fields of the south hold the majority of
these reserves

Crude oil production in 2014 was above 3.4 mmboepd,

forecast to increase to over 7 mmboepd
Iraq will move to 4th largest oil producer, behind
Saudi Arabia, Russia and the U.S. by 2017

There has been a rapid widening of Iraq's petroleum

sector to foreign participation in the last five years
More than 25 international oil companies now
have a licence interest in Iraq

Producing fields in Iraq are operated under Technical

Services Contracts (TSC), offering some of the most
stringent terms in the Middle East

Most of the major IOCs hold strategic positions in Iraq,

focussing on developing large-scale projects in the
south and have to-date shown little interest in picking
up exploration acreage due to non-friendly investor
terms

Ongoing restructuring of existing contracts and

rumoured new investor friendly terms on new
licensing rounds may reverse this trend

3
1. Oil Sector Overview ##

2. Infrastructure Overview ##

3. Upstream activity and licensing history ##

4. Political challenges ##

5. Future opportunities in Iraq ##

6. Appendix ##
Iraqi oil reserves and production, in perspective

History of Iraqi fields discovery Global Oil Reserves

350
Iraqs first wells were drilled in Chia Surkh in 1902 and encountered oil
and gas shows, but were abandoned for more productive prospects 300

No. of barrels (bn)

elsewhere
250

In 1927, major oil exploration got underway, with huge deposits 200
discovered in Mosul province 150
144 bnboe

Two years later, the Iraqi Petroleum Company, comprising of 100

Anglo-Iranian (today British Petroleum), Shell, Mobil and Standard
Oil of New Jersey (today Exxon), began producing oil 50
0
Super giant discoveries were soon be made, starting with Kirkuk field by
the Turkish Petroleum Company in 1927, followed by:
Zubair was discovered by Basrah Petroleum Company, an affiliate
of the Iraq Petroleum Company, in 1949 Source: CIA The World Factbook
Rumaila was discovered by Basrah Petroleum Company in 1953
Majnoon field was discovered by Braspetro in 1975, under the Global Gas Reserves
leadership of Bolivar Montenegro Guerra
60
The super giant West Qurna field was discovered only 65 km away from 50
other Basra super giant fields by Soviet geologists in 1973

Trillion cubic meters

40
With these discoveries, Iraq holds the fifth largest oil reserves in the
30
world, behind only Saudi Arabia, Venezuela, Canada and Iran
20
Iraq holds about 144 bnbbl of proved crude oil reserves,
representing 18% of proved crude oil reserves in the Middle East 10 112 TCF
and almost 9% of total global reserves 0

Most known oil and natural gas resources are concentrated in the
Shiite areas of the south and the ethnically Kurdish region in the
north, with significant prospectivity in the western and central
parts of Iraq
Source: CIA The World Factbook

5
 Iraqs 144 billion barrels of reserves by province
5,804
6,000 600
Ta'mim

Commercial P+P
5,000 500

2012E Prod'n
Field P+P Prod'n

(mboe/d)
(mmboe)
(mmboe) (mboe/d) 4,000 400
Bai Hassan 3,846 205 3,000 300
2,000 1,859 40 Hamrin 886 0 2,000 1,442 200

Commercial P+P

2012E Prod'n
Ninewa Jambur 1,803 71 1,000 100 484
1,500 30 500 40

(mboe/d)
Khabbaz 711 31

(mmboe)
Field P+P Prod'n

Commercial P+P
0 0
400

2012E Prod'n
(mmboe) (mboe/d) 1,000 20 Liquids Gas Salahuddin 30

(mboe/d)
(mmboe)
Ain Zalah/West Butmah 301 5 Field P+P Prod'n 300
500 10 (mmboe) (mboe/d) 20
Shaikan 1,500 8 200 134
0 Ajil 618 12
Sufaya 58 0 0 0 10
100
Liquids Gas
0 0
Dohuk Liquids Gas
Kurdistan Pipelines

Erbil
ISIS primary areas of activity 734
800 40
are not in the major oil Ninewa

Commercial P+P

2012E Prod'n
Diyala
producing regions 600 30

(mboe/d)
(mmboe)
Field P+P Prod'n
Tamim (mmboe) (mboe/d) 400 20
500 500
Suleimaniyah East Baghdad 620 15
Naft Khaneh 114 5 200 10
Commercial P+P

377
400 400 0
2012E Prod'n

Anbar
(mmboe)

0 0
(mboe/d)

Field P+P Prod'n 300 300 Kurdistan Liquids Gas

(mmboe) (mboe/d) 200 200 Salahuddin Line of Control
Akkas 468 0 91
100 100
0 0 Diyala
Liquids Gas

23,294
Anbar 25,000 500

Commercial P+P
Misan
20,000 400

2012E Prod'n
Wasit Field P+P Prod'n

(mmboe)

(mboe/d)
1,918 Babil (mmboe) (mboe/d) 15,000 300
2,000 100 Karbala
Halfaya 4,940 71
Commercial P+P

10,000 200
2012E Prod'n

Wasit 1,500 75 Majnoon 16,978 100

(mmboe)

(mboe/d)

5,000 100
Field P+P Prod'n Qadisiyah Misan
Misan Group 2,500 104 1,124
(mmboe) (mboe/d) 1,000 50
0 0
Ahdab 1,163 60 Liquids Gas
500 25
Badrah 755 0
0
0 0 Najaf Basrah
Liquids Gas Dhi-Qar Field P+P Prod'n
80,000 71,823 4,000
(mmboe) (mboe/d)

Commercial P+P
Basrah Basrah Gas Project 3,497 105
Iraq Pipelines

2012E Prod'n
60,000 3,000

(mmboe)

(mboe/d)
Luhais and Subba 769 27

1,964
Muthanna Nahr Umr 1,090 5 40,000 2,000
2,000 100 Ratawi 931 6
Rumaila 31,058 1,300
Commercial P+P

20,000 1,000
2012E Prod'n

Dhi-Qar 1,500 75 Siba 118 0 4,444

(mmboe)

(mboe/d)

Field P+P Prod'n Tuba 189 5 0 0

(mmboe) (mboe/d) 1,000 50 West Qurna One 14,932 377 Liquids Gas
Gharraf 1,100 35 West Qurna Two 14,185 0
Nasiriyah 864 6 500 25 Zubair 9,498 300
0 Commercial P+P (mmboe)
0 0
Liquids Gas
2012E Production (mboe/d)

Key oil producing provinces Key provinces for exploration Kurdistan provinces

6
Iraq political history plays a big role in oil & gas output

Background Historical crude oil production was sporadic

mmboe/d
For most of recent history, Iraq was ruled by the Ottoman Empire 4
until World War I where Iraq was passed to British control until the 3.5
Kingdom of Iraq was formed in 1932
3
Oil prospecting in the county began almost immediately after WWI, 2.5
with the Iraqi Petroleum Company (IPC), an antecedent of British 2
oil giant BP, receiving prospecting rights for nearly 100% of Iraqi 1.5
territory
1
A coup was launched in 1958, ushering in an ear of Baathist rule 0.5
when in the late 1960s, IPC was nationalized and the state 0
cemented its control of the oil industry

1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Saddam Hussein came to power in 1979 as the chosen successor,
launching wars against neighbours and alienating the international
community
with significant drops in the 80s-90s limiting investment
Sanctions were placed on Iraq in 1990 and lasting until 2003,
mmboe/d
limiting any western investment or activity in Iraqs oil sector
4
Following the Iraq War in 2003, a new constitution was passed in 3.5
2005 and public licensing rounds for the oil sector commenced 3
The outcome of these licensing rounds has been underwhelming 2.5
as significant commercial challenges still exist and most of Iraqs 2
oil infrastructure is outdated and in need of significant repair 1.5
After reaching an all-time high in December 1979 at 3.7mmboepd, 1
production collapsed in the 80s and again in the 90s after a short 0.5
rebound in the early 90s 0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Iraqi 3 biggest fields (Rumaila, West Qurna I and II) account for
c. 55% of the total Iraq production capacity
Source: U.S. Energy Information Administration as of January 2015

With reclusive political leadership, Iraq struggled to attract investment and maintain production
7
Key milestones in Iraqs oil and gas history

Key milestones Oil from Babylon to Iraq

1902 First oil exploration well (drilled in Chia Surkh)

1927 Discovery of the super-giant Kirkuk field

1938 Exploration terminated due to war preparation

1948 Exploration re-started, discovery of Zubair and Nahr Umr fields

1953 Rumaila field is discovered

1961 Termination of activities by IOCs according to law No. 80

1964 Iraq National Oil Company (INOC) established

70s /
Many new fields discovered (including West Qurna and Majnoon)
80s

1979 Iraq oil production peaks

80s /
Decline in activity due to sanctions, IranIraq war and two Gulf wars
90s

2007 KRG develops its own PSC and begins licensing

2008 /
First, Second and Third licensing rounds announced and awarded
2010

2012 Fourth licensing round announced April 2012 -only 3 blocks awarded

8
One of the biggest challenges is a nationalized sector with a large network of
state-owned companies
Ministry of Oil

Upstream Downstream Institutes

North Oil Co. North Gas Co. Petroleum Research and Development Centre

South Oil Co. South Gas Co. Baghdad Oil Training Institute

Missan Oil Co. North Refineries Co. Kirkuk Oil Training Institute

Midland Oil Co. South Refineries Co. Basrah Oil Training Institute

Oil Exploration Co. Midland Refinery Co. Baiji Oil Training Institute

Iraq Drilling Co. Oil Pipelines Co.

Oil Project Co. Iraqi oil Tankers Co.

Oil Marketing Co.

Gas Filling Co.

Oil Product Distribution Co.

Heavy Engineering Equipment Co.

State Org for Marketing Oil (SOMO)

State Co for Oil Projects (SCOP)

9
But, Iraq oil and gas outlook is starting to look more promising

Key recent developments in Iraq Blocks awarded by region

1990 Economic sanctions against Iraq (through 2003) No. blocks Kurdistan Northern Iraq Southern Iraq Western Desert

18
2005 National Assembly commences drafting constitution
16
2009 1st federal Iraqi bid round: TSC structure 14
2nd federal Iraqi bid round: TSC structure
12

2010 3rd federal Iraqi bid round: First exploration licenses 10

8
2011 Kurdistan production reaches 150 kboepd (from nil in 2007)
ExxonMobil signs 6 PSCs in Kurdistan Region 6
4
2012 4th federal Iraqi bid round fails to attract IOCs
2

2015 Iraq hits highest exports of 3.7 mmboepd in January -

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Reserves and production by province Historical and forecast production

kboe/d 2014-2023E Production CAGR: 6%
2P by Province 2014 Production by Province
7,000 14%
1% 6% 6%
2% 6,000 12%
5%

9% 5,000 10%

17% 8% 4,000 8%
53% 12%
63% 3,000 6%
18%
2,000 4%

1,000 2%

Basrah Erbil Misan Basrah Erbil Misan 0 0%

2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Ta'mim Dhi-Qar Other Ta'mim Suleimaniyah Other

Total: 144bnboe Total: 3.4mmboe Liquid Gas % Gas

Source: Wood Mackenzie Source: Wood Mackenzie

10
 with significant infrastructure in-place to support production targets
Oil fields Partners Prod. Capacity (kbpd) Export outlet
Iraq capacity
Rumaila BP, CNPC 1,430
West Qurna-1 ExxonMobil, Petrochina, Shell 550
West Qurna-2 Lukoil 220
Zubair Eni, Occidental 360
Basra port including 3 SPM systems and Khor al-
Majnoon Shell, Petronas 200
Amaya port
Garraf Petronas, Japex 100
Missan fields (Fakka, Abu Gharb, Bazergan) CNOOC 135
Halfaya CNPC, Total, Petronas 110
Other fields 215
S. Iraq capacity 3,320
Ahdab CNPC 140
Badra Gazprom Neft, Kogas, Petronas 15 Connected to southern export infrastructure
Other fields 25
C. Iraq capacity 180
Kirkuk (Avana & Baba) 220
Bai Hasan 185 Iraq (Kirkuk) to Turkey (Ceyhan) pipeline
Jambur 40 (Flows stopped in March 2014 and the pipeline
Khabbaz 30 is currently unusable.)
Other fields 50
N. Iraq capacity 525
Iraq Total capacity 4,025

Kurdistan capacity
Khurmala Dome (northern of Kirkuk) 110
Tawke DNO, Genel Energy 130 KRG pipelines that connect to Turkey Ceyhan)
Taq Taq Genel Energy, Sinopec 130 pipeline; some oil trucked to ports in Turkey
Shaikan Gulf Keystone 21 Mersin, Dortyol, & Toros) and to Iran
Other fields 36
Total KRG capacity 427

Total capacity 4,452

Source: U.S. Energy Information Administration, Energy Intelligence Group, Iraq Oil Report, Middle East Economic Survey;
Note: Iraq's actual production is much lower than capacity as most oil fields are producing below capacity because of infrastructure constraints; A portion of northern production is not being produced commercially and is considered a supply disruption

11
Most Iraqi oil is being exported from the ports in Basra

Map Iraq maintains significant and consistent oil production

mmbpd
3.5
550kboepd
3.0
2.5
2.0
1.5
1.0
0.5
0.0
150kboepd

Feb-13

Aug-13

Oct-13
Nov-13

Feb-14

Aug-14

Oct-14
Nov-14
Mar-13

May-13

Mar-14
Jun-13

Sep-13

May-14
Jun-14

Sep-14
Apr-13

Dec-13

Apr-14

Dec-14
Jan-13

Jul-13

Jan-14

Jul-14
Southern exports Northen exports (Iraq-Turkey pipeline) Northen exports (KRG-Turkey pipeline)

Source: Iraqi Ministry of Oil, Lloyds List Intelligence (APEX tanker database)

Exports overview
2.7mmboepd
About 95% of Iraq's crude oil exports came from the country's southern
export terminals along the Persian Gulf in 2014, which export Iraq's Basra
crude grade, compared with 2013 when it was slightly below 90%
Northern seaborne exports from the Turkish Ceyhan port via the Iraq-
Turkey pipeline averaged 260 kbpd in 2013
Northern exports in Iraq fell substantially after the Iraq-Turkey
pipeline went out of service in March 2014
The KRG started to export crude via its independent pipeline for the first
time in May 2014
Northern exports (KRG-Turkey pipeline) The pipeline flows have reached more than 300 kbpd, but this flow
Northern exports (Iraq-Turkey pipeline) Non-operational level has not been maintained on a sustained basis
Southern exports
Iraq previously exported about 10 kbpd of crude to Jordan by truck, but due
to insecurity in the Anbar province, those exports were halted in early 2014
The KRG trucks about 50 kbpd to 100 kbpd of crude and condensate to
Note: Exports shown only include oil transported via pipeline to a seaport, not crude trucked to a the Turkish ports of Mersin, Dortyol, and Toros, and to Iran
seaport

12
And a majority of the oil is coming from the four super giant fields

Iraqs daily production by field Key buyers of Iraqi crude

China was the largest importer of Iraq's crude oil, followed by India and the
United States in 2014
8,000 8.0
Total Iraqi crude oil exports averaged 2.6mmboepd in 2014, 0.2 mmboepd
higher than the previous year

7,000 7.0 Asia (led by China, India, and South Korea) is the main destination for Iraq's
crude oil, importing 58% of the total in 2014
The U.S. is the third-largest importer of Iraq's crude, although the volume
6,000 6.0 has fallen over the past decade
The U.S. imported an average of 355kbpd of crude from Iraq in 2014,
30% lower than the volume received 10 years before in 2005

Export Capacity (mmbbls/d)

5,000 5.0
The growth in U.S. oil production has resulted in a sizable decline in
Oil Production (kbbls/d)

U.S. imports of crude grades of similar quality

4,000 4.0
Iraqs crude oil exports by destination (2014)
3,000 3.0

Other Americas
3%
2,000 2.0 China
Other 22%
United States
6%
14%
Americas
1,000 1.0 17%
Other Europe Asia
Europe
9% 58%
19% India
Italy 19%
- - 4%
2014 2015 2016 2017 2018 2019 2020 Greece
6%
Rumaila Kirkuk Zubair West Qurna One Kurdistan Other Asia South Korea
West Qurna Two Majnoon Other fields Halfaya Bai Hassan 8% 9%

Badra Basra Gas Project Ajil East Baghdad Gharraf

Jambur Khabbaz Luhais and Subba Misan Group Source: U.S. Energy Information Administration based on Lloyds List Intelligence (APEX tanker
database)

13
Ongoing successful drilling activity is spurring a new interest in exploration

Iraq holds great promise for substantial undiscovered resources Increasing wells being drilled in Iraq and Kurdistan
A remarkable feature of Iraqi oil reserves is the majority lie within 10,000 ft of mmboe
the surface, with 30-40% lying within 2,000-5,000 ft 80
The majority of oil production comes from Cretaceous reservoirs (76%),
70
with the remainder coming from Tertiary reservoirs (24%)
The Iraq-Iran War in stopped new exploration activity in Iraq from 1980-1988 60

Subsequent sanctions placed on Iraq from 1991 until 2003, restricted technology 50
57
and materials imperative for oil production 40 36
40
Ruled out many imports of mud chemicals for drilling and well logging
30 27
Only 248 wells drilled from 1991 until the beginning of 2005
20
The vast majority of wells are vertical, with no horizontal or multilateral
technology employed 10 14 22 24
10 15 19
9
Use of horizontal and multilateral technology, can easily give a 10% uplift in 0 1 3 5
the recovery factor 2008 2009 2010 2011 2012 2013 2014
Iraqs exploration success rate is 2 in 3 (about 67%), compared to the world Iraq KRG
average of 1 in 10, confirming the regions prospectivity

Consistent access to rigs supports drilling activity resulting in significant projected production growth
kboepd
120
7,000
100 6,000

80 5,000

60 4,000

3,000
40
2,000
20
1,000
0
0
Sep-12
Oct-12

Sep-13
Oct-13
Jun-12

Jun-13

Jun-14
Nov-11

May-12

Aug-12
Jan-12
Feb-12

Nov-12

May-13

Aug-13

Aug-14
Jan-13
Feb-13

Nov-13

Jan-14
Feb-14

May-14
Mar-12

Mar-13

Mar-14
Dec-11

Apr-12

Jul-12

Dec-12

Apr-13

Jul-13

Dec-13

Apr-14

Jul-14

Liquid Gas
Iraq Oil Rigs
Source: Manaar Energy, IHS Source: Wood Mackenzie

14
 New attractive fiscal terms may spur companies to expand presence in Iraq

Iraq has one of the worlds largest petroleum reserves in the world with the worlds largest IOCs and OFS companies, with:
Significant underexplored areas offering world-class exploration potential, and
Many sizable discoveries from recent tender rounds already under development and about to bring production to market

Safety and ability to operate in the southern oil provinces of Iraq has remained despite security concerns in the west and north of Iraq

The corporate landscape in Iraq has been evolving since 2008 and with the countrys new Prime Minister and Minister of Oil
reviewing changes to the oil licensing regime, a new investor landscape may be evolving again soon

Recent renegotiations on existing contracts reveals the potential for further contract renegotiations to sweeten the terms for the
contractors

Such agreements would set the stage for future licensing rounds to offer more investor friendly terms and bring business back into
Iraq

Reserves by field Shell and CNPC are the private companies with the largest reserves
mmboe mmboe
18,000 10,000
16,000 9,000
14,000 8,000
12,000 7,000
10,000 6,000
8,000 5,000
4,000
6,000
3,000
4,000
2,000
2,000
1,000
0
-
Siba
Nahr Umr

Badra

Summail
Jambur
Ahdab

Ajil

Akkas
Zubair

Basrah Gas Project

Khabbaz

Naft Khaneh
West Qurna One

Nasiriyah

Mansuriyah

Ratawi

Ain Zalah/West Butmah

Majnoon

Bai Hassan
Misan Group

Miran West

Luhais and Subba

Iraq other fields

Kormor
Rumaila

Tuba

Sarqala Development Area

Halfaya
West Qurna Two

Gharraf

East Baghdad

Eni

Gazprom
ExxonMobil

Kogas
Shell

SOMO
CNPC

Petronas
BP

Petrochina

Oil Exploration Company

Statoil

Occidental
Pertamina

KRG

Kuwait Energy
Total
South Oil
LUKOIL

Misan Oil

CNOOC

TPAO
Iraq Drilling Co.
Nineveh Oil

Iraq NOC

JAPEX
North Oil

Midland Oil
Source: Wood Mackenzie and IHS Liquids Gas Iraq National Oil Companies

15
1. Oil Sector Overview ##

2. Infrastructure Overview ##

3. Upstream activity and licensing history ##

4. Political challenges ##

5. Future opportunities in Iraq ##

6. Appendix ##
Iraq pipelines infrastructure overview

Overview Map

Iraq faces many challenges in meeting its planned timetable for oil
production
Kurdistan Ceyhan
Inadequate pipeline, storage and pumping capacity has led to Capacity: 1,500kbpd
Tawke - Fishkabur
the only option of crude being exported from Basra Capacity: 100kbpd

Planned pipelines to energy hungry neighbours Syria and Jordan Khurmala Dome - Fishkabur
Capacity: 300kbpd
have never materialized
ITP
Capacity: 600kbpd
Existing Iraq-Turkey Pipeline (IPT) has a constant target for Not operating
sabotage and has been shut down due to constant attacks by ISIS
Current production of c. 150kbpd from Northern Iraqi fields is
being diverted into the KRGs export pipeline to Turkey

To support crude exports in Basra, export facilities' capacity was

expanded in recent years by adding on three single point moorings
(SPMs) near the Basra and Khor al-Amaya ports with two additional
SPMs planned
The SPMs have a design capacity of 900kbpd each, but have
been operating below that amount
The SPMs have added much needed shipping capacity to the
south, as the Basra and Khor al-Amaya ports are operating well
Strategic pipeline
below capacity after enduring three wars and poor maintenance Capacity: 800kbpd
Not operating
Export capacity has expanded at a faster rate than midstream
infrastructure, inhibiting the ability of oil companies to meet their
production goals (often contractually required)
Poor oil production growth in 2013 is attributed to
infrastructure bottlenecks in the south and an increase in supply
disruptions to northern fields because of frequent attacks on the
Iraq-Turkey pipeline

Source: U.S. Energy Information Administration, Energy Intelligence Group, Iraq Oil Report, Middle East Economic Survey

17
Iraq export pipeline network is in severe need of rehabilitation and repair

Overview Iraq existing major export pipelines

Currently, the only working major pipelines in northern Iraq are Description Direction Location
Capacity
Status
(kbpd)
two pipelines built by the KRG and its international partners: KRG's
main pipeline and the DNO/Tawke pipeline, which both link to the
Iraq-Turkey Pipeline (ITP) Kirkuk to Fishkhabur N. Iraq 600 Not operating
Turkey pipeline to the Ceyhan port.

Given lack of available infrastructure and strategic location of super Kirkuk-Banias/Tripoli Kirkuk to Banias (Syria)
N. Iraq 700 Not operating
giant fields to Basra export infrastructure, a majority of Iraqs crude Pipeline and to Tripoli (Lebanon)
is exported via Basra
North-South
Strategic Pipeline Kirkuk to Persian Gulf 800 Not operating
2.7 mmboepd is exported via Basra (Iraq)

With 600 kbpd that used to be exported through the ITP now unable Iraq Pipeline to Saudi Southern Iraq to port of S. Iraq &
1,650
Not operating (Iraq
to be exported due to sabotage on the pipeline, Baghdad reached an Arabia (IPSA) Mu'ajjiz in Saudi Arabia Saudi Arabia portion)
agreement with the Kurdish Government to export some of Iraqi
crude through Kurdish infrastructure
Under the existing framework, 300 kbpd of Iraqi crude is to be
exported via the Kurdistan-Ceyhan pipeline KRI existing major pipelines
Significant plans to pipe oil & gas to energy starved neighbours has
never materialized
Capacity
Description Direction Location Status
(kbpd)
But storage capacity has grown significantly in Basra with four new
Kurdistan-Ceyhan Pipeline Fishkhabur to port of
storage tanks recently added (6.5 mmbbls) and exports going through S. Turkey 1,500 Operating
(KCP) Ceyhan
the three tanker terminals of:
Khurmala Dome- Tie-in Khurmala and
N. Iraq 300 Operating
Basra, Khor-al-Amaya and Khor al-Zubair Fishkhabur Pipeline Kirkuk crude to KCP
Tie-in DNO/Genel fields to
Tawke-Fishkabur Pipeline N. Iraq 100 Operating
KCP

Most crude oil is exported via Basra, as pipelines have been constantly subject to attacks in the North
Source: U.S. Energy Information Administration, Energy Intelligence Group, Iraq Oil Report, Middle East Economic Survey

18
Old infrastructure is in need of rehabilitation, but high costs and delays have
plagued the refining sector

Refining sector overview Location of existing and planned refineries

Iraq has 13 refineries most of which do not produce the products the
local market needs
Iraqi refineries produce more heavy fuel oil than is needed
domestically and not enough of other refined products, such as
gasoline Qayara refinery
(16kbpd)
Kirkuk refinery
In June 2014, ISIS attacked the Baiji refinery, brining operation to a (150kbpd)
halt Sininya refinery
(30kbpd) Kirkuk refinery
The Baiji refinery was the key refinery that produced diesel and (30kbpd)
Baiji refinery
gasoil for the local market (230kbpd)
Hadeetha refinery
Although the Iraqi government regained control of Baiji, the (16kbpd)
refinery is still not operational causing a near halt to
commercial production in northern Iraq (not including the Iraqi
Kurdistan Region)

Total designed capacity of Iraqs refineries is estimated at 1.1 Daura refinery

mmbpd, although estimates vary because effective capacity has fallen (140kbpd)
below designed capacity in most cases Karbala refinery Maysan refinery
(30kbpd)
Before the June 2014 ISIL attack on the Baiji refinery, effective (140kbpd) Diwaniyah refinery
(20kbpd)
refining capacity in Iraq (incl. KRI) was 800kboepd, but with
the Baiji refinery not being operational, Iraq's total effective Najaf refinery Maysan refinery
capacity is now estimated below 600kboepd (30kbpd) (150kbpd)
Samawah refinery
Iraq has plans to build four new refineries and expand capacity at (30kbpd)
the Daura and Basra refineries, targeting an increase in refining Basrah refinery
capacity to 1.5 mmbpd (135kbpd)
Nassiriya refinery
(30kbpd)
Government expected these new projects to come online
starting in 2018 Nassiriya refinery
(300kbpd)

Planned refinery

Source: U.S. Energy Information Administration, Energy Intelligence Group, Iraq Oil Report, Middle East Economic Survey

19
With ageing infrastructure, Iraq needs to spur the development of new refineries

Iraqs refineries operate significant under designed capacity New refineries have been planned for the past four years

Iraq refineries Capacity (kbpd) Comments

Future refineries Capacity (kbpd) Comments
Baiji 310 Effective capacity is 230 kbpd
Nassirya 300 (est. $6.83bn cost)
Kirkuk 30

Sininya 30 Karbala 140 (est. $5bn cost)

Hadeetha 16
Kirkuk 150 (est. $4.24bn cost)
Qayara 16
Maysan 150 (est. $5.76bn cost)
Kasak 10

North Refineries 412 Planned Refinery Total 740

Daura 210 Effective capacity is 140 kbpd

Najaf 30 but new refineries are in operation in Kurdistan

Samawah 30
Kurdistan refineries Capacity (kbpd) Owner Comments
Diwaniya 20
Effective capacity is
Midland Refineries 290
80kbbl/d;
Kalak (near Erbil) 80 KAR Group
plans to add 95kbbl/d of
Basrah 210 Effective capacity is 135 kbpd
processing capacity by 2018
Maysan 30
Effective capacity is
Nassiriya 30 Bazian (near Sulaimanya) 20kbbl/d;
34 Qaiwan Group
plans to add 66kbbl/d of
South Refineries 270 processing capacity by 2018

Iraq Total (excl. KRI) 972 Kurdistan Total 114

Source: U.S. Energy Information Administration, Energy Intelligence Group, Iraq Oil Report, Middle East Economic Survey

20
Iraq refined product demand is underserved and growing

Plans need to be developed to meet local demand

800 28% growth in consumption

700

600

Projected future consumption

Domestic refining capacity
500

400

300

200

100

0
2007 2008 2009 2010 2011 2012 2013 2014 2030

Consumption Import Domestic Refining Capacity

Refining capacity (below 600kbpd) runs at 50% capacity and produces heavy fuelsnot the products consumers need

Four new refineries have been under planning since 2007 and none are expected to come online after 2018 at the earliest
$20 billion is required to fund new refinery construction but limited investor interest and delays continue to stall projects

Importing refined products is the only short-term solution to meet growing demand

Source: Manaar Energy Consulting, June 2014

21
1. Oil Sector Overview ##

2. Infrastructure Overview ##

3. Upstream activity and licensing history ##

4. Political challenges ##

5. Future opportunities in Iraq ##

6. Appendix ##
Iraq licensing process overview

Iraq nationalized the oil sector in 1972 and all oil production was being handled and operated by various Iraqi NOCs

After the Second Gulf war, the Iraqi government needed to ramp-up production and spur investment in ageing super-giant fields

General strategy was to use a highly competitive licensing round system to promote the rehabilitation, redevelopment and appraisal of
Iraqi oil fields
The Government awarded technical services contracts (TSC) and development and production service contracts (DPSC) to oil
companies
TSCs are operated by a remuneration fee (between $1.15 6.00/bbl, adjusted downwards as the ration of cumulative revenue to
cumulative costs increases) mechanism alongside cost recovery

Iraq launched a first public bid process in 2008 with a TSC structure to remunerate oil companies a flat fee for each barrel they
produce
The process attracted offers from 31 firms including US and European giants ExxonMobil and Shell but also an array of Asian
companies from China, India, South Korea and Indonesia
However, bids were underwhelming based on the remuneration fee awarded by the Iraqi government

Subsequent rounds have seen fewer and fewer bidders due to a combination of:
Inadequate incentive to counter the geological, political and logistical risks associated with the acreage and the most recent
licensing round in Iraq failed to attract interest
Tight fiscal terms and low remuneration fees
Difficulty in operations (importing materials and securing work visas on time)
Slow responses from the Ministry of Oil

However, in the Kurdistan Region, a different system was used whereby:

Licence awards on an ad-hoc basis based on standard PSC contracts (5 years exploration + 25 years development period)
Establishment of oil and gas law in 2007, whereby PSCs operate with a fixed royalty (except for heavy oil), cost recovery (up to a
ceiling), and proportion of profit oil

23
Iraq first licensing round ushered in the worlds biggest oil companies

First round (2008-2009) Map

Maximum Remuneration Signature

Project remuneration fee fee bid bonus Contractor
(US$/barrel) (US$/barrel) (US$mm) 1
CNOOC (63.75%)
Maysan $2.30 $21.40 $300 Iraq Drilling Co. (25%)
TPAO (11.25%)
BP (47.6%) 2
Rumaila $2.00 $3.99 - $4.80 $500 CNPC (46.4%)
SOMO (6%)
ExxonMobil (25%)
North Oil (25%)
3
West Qurna 1 $1.90 $2.60 - $19.30 $100 Petrochina (25%)
Shell (15%) 8
Pertamina (10%) 4
Eni (32.81%) Maysan
Occidental (23.44%) 5
Zubair $2.00 $4.09 - $9.90 $100
Missan Oil (25%)
Kogas (18.75%)

11 10 9
6
12

West Qurna 1
Zubair
Rumaila

Licensed blocks Oil field

Provincial license blocks Gas field
KRG blocks Pipeline
Source: Wood Mackenzie Open blocks Refinery

24
Iraq second licensing round sees investors shift to NOCs due to tighter fiscal terms

Second round (2009) Map

Maximum Signature
Project remuneration fee bonus Contractor
(US$/barrel) (US$mm) 1
LUKOIL (56.25%)
West Qurna 2 $1.15 $100 Oil Exploration Company (25%)
Statoil (18.75%)
Shell (45%)
Majnoon $1.39 $150 Petronas (30%) 2
Misan Oil (25%)
PetroChina (37.5%)
South Oil (25%)
Halfaya $1.40 $150
Petronas (18.75%) 3
Total (18.75%)
8
Petronas (45%)
4 Badra
Gharraf $1.49 $100 JAPEX (30%)
North Oil (25%)
5
Gazprom (30%)
Midland Oil (25%)
Badra $5.50 $100 KOGAS (22.5%) Gharraf
Petronas (15%) Halfaya
TPAO (7.5%) 7
Sonangol (75%) Majnoon
Qaiyarah1 $5.00 $100
Nineveh Oil (25%)
11 10 9
Sonangol (75%)
Najmah1 $6.00 $100 6
Nineveh Oil (25%) 12

West Qurna 2

Licensed blocks Oil field

Provincial license blocks Gas field
Source: Wood Mackenzie KRG blocks Pipeline
1Field has been relinquished Open blocks Refinery

25
Iraq third licensing round sees limited interest and poor bidder turn out

Third round (2010) Map

Maximum remuneration fee

Project Contractor
(US$/barrel)
1
KOGAS (37.5%)
1
Akkas $5.50 KazMunaiGas (37.5%)
Iraq state equity partner (25%)

TPAO (37.5%) 2
Kuwait Energy (22.5)
Mansuriyah $7.00
KOGAS (15%)
Iraq state equity partner (25%)
Mansuriyah
3
Kuwait Energy (45%)
Siba $7.50 TPAO (30%) 8
Iraq state equity partner (25%) 4

11 10 9
6
Siba
12

Licensed blocks Oil field

Provincial license blocks Gas field
Source: Wood Mackenzie KRG blocks Pipeline
1Field has been relinquished
Open blocks Refinery

26
Iraq fourth licensing round for exploration sees few blocks awarded again

Fourth round (2012) Map

Maximum Signature
Block Acreage (km 2) remuneration fee bonus Contractor
(US$/barrel) (US$mm) 1

1 7,300 No bid $15 No award

2 8,000 No bid $25 No award

3 7,000 No bid $20 No award 2

4 7,000 No bid $20 No award

5 7,000 No bid $20 No award

No award 3
6 9,000 No bid $20
8
7 6,000 No bid $20 No award
4
11 8,000 No bid $15 No award
5
8 6,000 $5.38 $15 Pakistan Petroleum (100%)

Kuwait Energy (40%)

9 900 $6.24 $25 TPAO (30%)
Dragon Oil (30%) 7

LUKOIL (60%)
10 5,500 $5.99 $25 11 10 9
Inpex Corporation (40%)
6
12
Bashneft (70%)
12 8,000 $5.00 $15 Premier Oil (30%)

Licensed blocks Oil field

Provincial license blocks Gas field
KRG blocks Pipeline
Source: Wood Mackenzie Open blocks Refinery

27
Provinces have begun to license exploration acreage to spur new investment
Wasit province
In 2011, Oryx Petroleum acquired a 66.67% shareholding in KPA
which through its subsidiary AmiraKPO holds a 75% participating
interest in 3 contracts with the Wasit Provincial Government,
involving:
Asphalt Exploration Contract
Exclusive rights to mine heavy oil, asphalts, tar and
bitumen (less than 25API) throughout the Wasit province
Non-exclusive rights to acquire 2D seismic data over any
part of the Wasit province up to a total of 7,000km
Seismic Option Agreement
Initial term of 5 years, expiring in 2016, with an option to
extend for an additional 5 years
Risk Exploration Contract (REC)
Right to conduct all exploration, gas marketing,
development, production and decommissioning operations
relating to petroleum operations in the contract areas
Amira holds a 25% carried interest, and the WPG is granted Back-In
Right to acquire up to a 20% participating interest in each Contract
Area
Source: Oryx Petroleum IPO prospectus
28
Salah ad Din province
In 2010, Sonoro and its partner, Berkeley signed a license with the
Provincial Government securing the exclusive right to explore for
asphalt/bitumen up to 25 in the Province
The area of the License is approximately 24,000 km2 and is situated
within the Tigris River Valley, between the Western Desert and the
foothills of the Zagros fold and thrust belt
Key terms of the license:
The exclusive rights to explore, develop and produce
asphalt/bitumen within the entire Province and to sell the
asphalt/bitumen produced (and/or the by-products after processing)
domestically and/or internationally;
The Licensee (Sonoro Iraq 40%; Geopetrol 40%; Berkeley 20%) is
required to make an investment of US$1.5mm on exploration
activities and construct a topping facility having a minimum 1kbpd
capacity within 18 months from making a commercial discovery
An initial exploration period of 5 years commencing April 14, 2011,
followed by a 30 year exploitation period with extensions for any
carved out exploitation areas to develop asphalt/bitumen
The Licensee is entitled to 50% of the revenues from the sale of
asphalt/bitumen (and its by-products after processing), after tax and
after cost recovery
A total of 80% of revenues are available for cost recovery
Crown Energy which acquired Tigris Oil in 2013, also claims to have
a license with the Provincial Government following the PSC
agreement signed by Tigris Oil with the Salah ad Din province in
2012
Source: Sonoro
Wasit and Salah ad Din provincial contract details

Overview of activity Block Map (licenses in yellow)

Given claims from provinces over poor distribution of oil revenues,

Wasit and Salah ad Din provinces signed contracts directly with oil
companies using the framework under the Iraqi constitution that the
KRG had used

The deals signed to-date have yielded little material activity due to 1
inability to mobilize equipment and get the required import permits
from the Federal Government
Some concerns remain as Salah ad Din Province is rumoured to
have awarded two provincial contracts to two different 2
companies for the same location

In the face of delays, the companies have continued to review Salah Ad Din
geological data in preparation for seismic programs 3 Province
8
Baghdad has not come out directly against the contracts but has not 4
been directly supportive to get work done in the provinces Wasit
5 Province

11 10 9
6
12

Licensed blocks Oil field

Provincial license blocks Gas field
KRG blocks Pipeline
Open blocks Refinery

29
Iraq company asset exposure

Co.
JAPEX

Wasit

Total
Bashneft

Eni

Misan Oil

Shell

Statoil
ExxonMobil

Gazprom

Premier Oil

SOMO

Total

Government
South Oil

TPAO
Amira

Dragon Oil

Geopetrol

KRG

Midland Oil

Nineveh Oil

North Oil

Occidental

PPL

Sonangol
LUKOIL
CNPC

Iraq Drilling

Pertamina

Sonoro
Oil Exploration

Petrochina
Inpex

Kogas

Oryx

Iraq NOC
KazMunaiGas

Company

Petronas
Kuwait Energy
Block/Field Operator

Wasit Province Oyrx 39 - - - - - - - - - - - - - - - - - - - - - - - 78 - - - - - - - - - - - - - 39 - 195

Salah ad Din Province Sonoro 42 - - - - - - - - 42 - - - - - - - - - - - - - - - - - - - - - - - 56 - - - - - - 141
1 N/A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 26,134
2 N/A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7,237
3 N/A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,959
4 N/A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,421
5 N/A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,421
6 N/A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,754
7 N/A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 850
8 PPL - - - - - - - - - - - - - - - - - - - - - - - - - - - - 12,028 - - - - - - - - - - - 12,028
9 Kuwait Energy - - - - - 207 - - - - - - - - - - 276 - - - - - - - - - - - - - - - - - - - - 207 - - 691
10 LUKOIL - - - - - - - - - - 379 - - - - - - 568 - - - - - - - - - - - - - - - - - - - - - - 947
11 N/A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,737
12 Bashneft - 1,549 - - - - - - - - - - - - - - - - - - - - - - - - - - - 664 - - - - - - - - - - 2,213
Ahdab North Oil - - - - 853 - - - - - - - - - - - - - - - - 284 - - - - - - - - - - - - - - - - - - 1,137
Ain Zalah/West Butmah North Oil - - - - - - - - - - - - - - - - - - - - - 40 - - - - - - - - - - - - - - - - - - 40
Ajil Iraq NOC - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 681 681
Akkas Kogas - - - - - - - - - - - - - - 374 - - - - - - 125 - - - - - - - - - - - - - - - - - - 498
Badra Gazrpom - - - - - - - - 284 - - - - - 213 - - - 237 - - - - - - - - 142 - - - - - - - - - 71 - - 946
Bai Hassan North Oil - - - - - - - - - - - - - - - - - - - - - 2,138 - - - - - - - - - - - - - - - - - - 2,138
East Baghdad Midland Oil - - - - - - - - - - - - - - - - - - 438 - - - - - - - - - - - - - - - - - - - - - 438
Gharraf Petronas - - - - - - - - - - - - 489 - - - - - - - - 408 - - - - - 734 - - - - - - - - - - - - 1,630
Halfaya PetroChina - - - - - - - - - - - - - - - - - - - - - - - 1,373 - - 2,059 1,030 - - - - - - - - 1,030 - - - 5,491
Iraq other fields N/A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 316
Jambur North Oil - - - - - - - - - - - - - - - - - - - - - 1,299 - - - - - - - - - - - - - - - - - - 1,299
Khabbaz North Oil - - - - - - - - - - - - - - - - - - - - - 536 - - - - - - - - - - - - - - - - - - 536
Kirkuk North Oil - - - - - - - - - - - - - - - 430 - - - - - 1,291 - - - - - - - - - - - - - - - - - - 1,721
Luhais and Subba South Oil - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 613 - - - - - 613
Majnoon Shell - - - - - - - - - - - - - - - - - - - 3,258 - - - - - - - 3,909 - - 5,864 - - - - - - - - - 13,031
Mansuriyah TPAO - - - - - - - - - - - - - - 72 - 108 - - - - - - - - - - - - - - - - - - - - 180 - 120 481
Misan Group CNOOC - - - 1,105 - - - - - - - 434 - - - - - - - - - - - - - - - - - - - - - - - - - 195 - - 1,734
Naft Khaneh N/A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 23
Nahr Umr South Oil - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5,150 - - - - - 5,150
Najmah Sonangol - - - - - - - - - - - - - - - - - - - - 923 - - - - - - - - - - - - - - - - - - - 923
Nasiriyah South Oil - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 803 - - - - - 803
Qaiyarah Sonangol - - - - - - - - - - - - - - - - - - - - 855 - - - - - - - - - - - - - - - - - - - 855
Ratawi South Oil - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 431 - - - - - 431
Rumaila BP - - 7,385 - 7,199 - - - - - - - - - - - - - - - - - - - - - - - - - - 931 - - - - - - - - 15,515
Siba Kuwait Energy - - - - - - - - - - - - - - - - 55 - - - - - - - - - - - - - - - - - - - - 37 - 31 123
Tuba South Oil - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 176 - - - - - 176
West Qurna One ExxonMobil - - - - - - - 3,826 - - - - - - - - - - - - - 3,826 - - - 1,530 3,826 - - - 2,296 - - - - - - - - - 15,304
West Qurna Two LUKOIL - - - - - - - - - - - - - - - - - 8,009 - - - - - 3,560 - - - - - - - - - - - 2,670 - - - - 14,239
Zubair Eni - - - - - - 2,447 - - - - - - - 1,399 - - - - 1,865 - - 1,748 - - - - - - - - - - - - - - - - - 7,459
Total (2P + 2C) (mmboe) 81 1,549 7,385 1,105 8,052 207 2,447 3,826 284 42 379 434 489 - 2,057 430 440 8,578 675 5,123 1,778 9,946 1,748 4,933 78 1,530 5,885 5,814 12,028 664 8,160 931 - 56 7,173 2,670 1,030 691 39 832 154,460
Total 2P (mmboe) - - 7,385 1,105 8,052 - 2,447 3,826 284 - - 434 489 - 2,057 430 164 8,009 675 5,123 1,778 9,946 1,748 4,933 - 1,530 5,885 5,814 - - 8,160 931 - - 7,173 2,670 1,030 483 - 832 93,731

Source: Wood Mackenzie, IHS, Company data ## Oil & Gas ## Gas ## Oil

30
1. Oil Sector Overview ##

2. Infrastructure Overview ##

3. Upstream activity and licensing history ##

4. Political challenges ##

5. Future opportunities in Iraq ##

6. Appendix ##
Iraq maintains strict government controls over oil and gas activities

The Iraqi Constitution creates a federal state, comprising a federal government, and regional or governorate governments

There are 18 governorates (sometimes referred to as provinces), but three of them merged to form the Kurdistan Region

The Kurdistan Regional Government (KRG) is the first of its kind on the governorate level

The Constitution allocates powers and authorities between the federal and regional authorities
Additionally, the Constitution gives regions and governorates power and authority over all matters that are not expressly stated to
be exclusive federal powers

1. Control of oil fields

Article 112 (First) establishes the petroleum power of the federal government, stating that, the federal government, with the
producing governorates and regional governments, shall undertake the management of oil and gas extracted from current fields

Thus, since current fields is not further defined, non-producing or exploration areas would not be included within the joint
management power of the federal government under Article 112 (First)

2. Current state of affairs

On this basis, the KRG has been awarding rights for non-producing and exploration areas, with 51 contracts awarded to date

Governorates have the same constitutional rights as the Kurdistan region with respect to petroleum, and are aiming to replicate the
success of the regional contract model

32
Political climate in Iraq

In February 2007, the Oil and Energy Committee of the Council of Ministers developed a draft Oil and Gas Law with the goal of
promoting federalism and decentralization in the industry, however this draft (nor any other) has yet to be enacted

In the absence of a federal Oil and Gas Law as contemplated by the Constitution, the KRG has exercised its constitutional jurisdiction
to award petroleum exploration and development rights

General jurisdiction articles (2005 Iraqi Constitution)

Article 110: Lists the extent of the exclusive federal authority but omits the issue of petroleum jurisdiction completely
Article 114: Outlines the specific competencies that should be jointly shared between federal and provincial authorities; again no
petroleum provisions
Article 115: States that all powers not specified under article 110 shall fall to regional authorities
In the event of a dispute between federal and regional shared powers, priority shall be given to the regional authorities

Oil and Gas Specific Articles (2005 Iraqi Constitution)

Article 111: Oil and gas resources are owned by all the people of Iraq in all the regions and governorates
Article 112: The federal government with the producing governorates shall undertake the management of oil and gas extracted
from current fields, provided that it distributes its revenue in a fair manner in proportion to the population distribution in all parts
of the country
The federal government, with the producing regional governorate governments, shall together formulate the necessary strategic
policies to develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people using the most advanced
techniques of market principles and encouraging investment

The debate has been whether non current fields (discovered but not developed or yet to be discovered) fall under federal or regional
jurisdiction

The KRG asserts exclusive jurisdiction over the petroleum exploration and development as it relates to non-producing fields, which at
the time of the Constitution included all of Kurdistans petroleum resources

Governorates are now following the KRG model in light of the fact that their petroleum rights are the same for any region

33
Oil and Gas Legislation Proposed New Laws

Cabinets draft oil law thought to provide for significant federal oversight
Federal oil committee with broad powers, covering setting energy policy, approving oil and gas model contracts, awarding
contracts and supervising and coordinating with federal, regional and provincial authorities
Federal committee would have power to assign fields for development and which should be developed by a national oil company,
which would be created under a new law
Regional authorities (KRG) could have licensing rounds and award contracts, but only in accordance with procedures and models
approved by the federal committee
Proposed national oil company would have right to sign contracts with IOCs to develop fields under its jurisdiction
Federal oil committee would have authority to determine whether existing federal contracts and KRG contracts are consistent
with the new oil law
All new oil and gas contracts require committee approval

Parliaments draft oil law thought to provide for decreased federal control
Grants governorates similar jurisdiction over local petroleum resources as the KRG
Committee consisting of federal oil minister, KRG minister of natural resources and chairman of parliamentary oil and energy
committee will resolve dispute over KRG contracts
Proposes lesser role for federal Ministry of Oil, INOC and Cabinet in managing upstream oil and gas industry, and expanded roles
for regional authorities

Enacting a federal hydrocarbon law was a precondition by the Kurdistan Alliance block in joining the al-Maliki government in
December 2010

Cabinet of Ministers spokesman stated that that all previous versions and drafts were to be regarded as cancelled and withdrawn, with
the Cabinets version the only one to be considered by the Council of Representatives

Presidency of the Kurdistan Region harshly condemned the substance and the timing of the submission of the Cabinets draft and
called on the Council of Ministers to withdraw the draft. The Presidency of the Kurdistan Region called on parliament to reject the
draft submitted by the Council of Ministers

34
A diverse population has created challenges in uniting under one political system

Iraq is striving to unify all ethnic groups Ethnic and religious break-up

Under the leadership of former Prime Minister Nouri al-Maliki,

Sunni and Shia tensions rose to an all time high with the ongoing
Kurdish independence fight adding further conflict

Ethnic groups began to focus on local politics and consolidate power

in their regional home bases

The ISIS conflict further exacerbated this crisis which lead to a

change in power, ushering in a new Prime Minister Haider al-Abadi
to reunite the parties under Iraq
Quick agreements were struck with the Kurds as a initial means
to cooperate
A new budget was passed to further distribute wealth between
the provinces and begin to address corruption

Future challenges still exist

Significant Sunni and Shia animosity exists between the Shia-led

Federal Government and the Sunni strongholds in Iraq where ISIS
has increased its regional presence
Uniting and fighting under the banner of a Federal Iraq will
likely be the solution to root out ISIS and reintegrate society

A final deal is still required to solve outstanding issues with the

Kurdish Regional Government, including reparations for Saddams
Anfals, budget sharing, oil licensing and production right, among
others

35
Differing interpretations of Iraqi constitution at heart of dispute with the KRG
Debate over who should control (and profit) from oil & gas
Much of the dispute stems from differing interpretations of Iraqs
constitution. Until its enactment in 2005, the federal governments
control over Iraqs hydrocarbons sector, established with the
nationalisation of 1972, was unassailable.
But the new Iraqi constitution, passed in 2005, said authority over oil
production is split between federal and provincial levels, stating, the
federal government, with the producing governorates and regional
governments, shall undertake the management of oil and gas extracted
from present fields
Since present fields is not defined, the KRG maintains that non-
producing and/or exploration areas as of 2005 are not the exclusive
province of the federal government
Under this premise the KRG has awarded 51 contracts for non-
producing and exploration areas
Recently the federal government softened its legacy stance that all
petroleum contracts entered into by the KRG are unconstitutional and
therefore invalid
Baghdad maintains that the Iraqi State Oil Marketing Organisation
(SOMO) has the exclusive authority to export oil from Iraq, including
any produced in the Kurdistan region.
Revenue from SOMOs exports goes to the federal government for
disbursement to the Iraqi governorates and regions in accordance
with the federal budget
Based on this position, Baghdad generally has not transferred all of
the proceeds from the sale of oil produced in Kurdistan leaving the
KRG coffers dry and unable to pay to IOCs producing in the region
their full share of cost and profit oil.
But an interim agreement with Baghdad in Nov 2014
signalled an end to the long standing dispute
36
Significant events in Iraq/KRG dispute
Oct-05 Iraqi constitution adopted
Feb-07 Draft federal petroleum law written but not passed
Agreement on initial revenue sharing (17% of net oil revenue in Iraq
Jun-07
go to Kurdistan)
Aug-07 KRG petroleum law approved by KRG Parliament
Iraqi Prime Minister announces Kurdistan PSCs will be respected. Oil
Feb-11
exports from Kurdistan resume via federal system (Ceyhan)
Iraqi Ministry of Finance confirms release of the first oil export
May-11
payment to KRG contractor June
Kurdistan producers receive first two payments for oil exports from
Sep-11
the Iraqi Ministry of Finance
Apr-12 KRG ceases oil export due to dispute with Baghdad
KRG resumes oil exports to progress reconciliation with Baghdad
Aug-12
over oil and gas law
Agreement signed with KRG and federal government to increase
Sep-12
KRGs oil exports; $500 million payment received from Baghdad
Dec-12 KRG ceases oil exports because of dispute with Baghdad
KRG approves trucked oil exports from Taq Taq field to Turkey. Erbil
Jan-13
building export pipeline to Turkey
Federal budget falls short of the KRGs requested budget allocation
Mar-13 by nearly $3 billion. KRG halts most oil sales via Baghdad and began
negotiations with Turkey for direct export
Nov-13 Construction complete on the Khurmala Fish Khabur oil pipeline
Oil export begins via pipeline to Turkey; Baghdad cuts all funding to
Jan-14
KRG government
May-14 KRG begins direct oil sales; Baghdad sues buyers
Baghdad and KRG reach interim agreement that includes $500
Nov-14 million monthly payment to KRG in exchange for delivering 150,000
bpd to Baghdad
KRG agrees to make an initial payment of $75m to contractors
Nov-14
exporting production; further regular payments to follow
The security situation continues to improve with coalition support

Recent events in the region support long-term stability prospects Map of security challenges

The Islamic State of Iraq and Syria, the terrorist organization with
roots in the Syrian uprising, began fighting Iraqi forces in western U.S.
Iraq (Anbar Province) in early 2014 airbase at
Harir
Airport
In June 2014, ISIS seized the northern Iraqi city of Mosul and began
threatening Kurdish territory and the capital of Erbil. This forced
many oil companies operating in Kurdistan to temporarily evacuate
personnel and suspend operations

In August 2014, the U.S. formed an international military coalition

to support Iraqi and Kurdish forces in the fight against ISIS
This proved that the U.S. and its international allies would not
let insurgents gain control of Baghdad or KRG land

An international coalition of 21 countries are supporting Iraqi and

Kurdish forces in Iraq and Syria, with dozens of others providing
military, humanitarian and intelligence aid
The U.S. Military announced its decision to take control of
Harir airport to support air operations against ISIS
Ongoing military operations have forced ISIS from the Baiji
Refinery, the Mosul Dam and other strategic locations ISIS Control Zones
throughout the Iraqi region
ISIS Attack Zones
Oil companies have remobilized in Erbil to operate the oil fields and ISIS Support Zones
continue exploration efforts Kurdistan

The security has never effected oil operations in Basra, bringing

production to record high levels in the past few months

37
1. Oil Sector Overview ##

2. Infrastructure Overview ##

3. Upstream activity and licensing history ##

4. Relations with the KRG ##

5. Future opportunities in Iraq ##

6. Appendix ##
Early excitement of IOCs has been offset by low returns and challenging operations

Maysan Block 8
Siba

Rumaila Block 9

West Qurna 1 Mansuriyah Block 10

Zubair
Block 12
Licence awards

2008 2009 2010 2011 2012 2015+

West Qurna 2
No new licenses awarded
Majnoon

Halfaya

Gharraf

Badra

Iraq needs to incentivise investments and attract companies back into Iraq
39
Baghdad has begun to renegotiate existing TSCs
BP/CNPC Rumaila
BP and China's CNPC signed a revised contract for Iraq's Rumaila oilfield in Sep-
14
The original contract had BP holding a 38% stake in the Rumaila venture, while
CNPC had a 37% share and Iraq's State Oil Marketing Organisation controlled the
remaining 25%
According to the revised deal, BP's share rose to 47.6% and CNPC's to 46.4%,
while Iraq's stake was reduced to 6%
Under the revised contract, BP has cut the planned output target for the
supergiant field to 2.1 mmboepd from 2.85 mmboepd and extended the life of the
deal
After signing a series of service agreements with foreign companies in 2009-2010
to develop its giant southern oilfields, Iraq set an overall production capacity
target of 12 mmboepd by 2020, which would rival the output capacity of top oil
exporter Saudi Arabia at 12.5mmboepd
But crumbling infrastructure, red tape and a lack of clear legislation have stunted
investor interest
Baghdad has reduced its overall capacity target to 8.5-9 mmboepd and returned to
the negotiating table to discuss revised planned output targets, known as plateau
production levels, with oil companies
Rumaila has estimated reserves of 17 bnboe
It currently produces around 1.3 mmboepd to 1.4 mmboepd, almost half of Iraq's
output
While Baghdad previously did not entertain renegotiations, current action shows future potential for attractive terms
40
CNPC Halfaya
China National Petroleum Company (CNPC; 37.5%, operator) has renegotiated
the plateau production target for the Halfaya field in Missan Province in Sep-14
The production plateau target has been reduced to 400 kbpd from 535 kbpd and
the duration of the field development contract has been extended from 20 years
to 30 years
As of Dec-14, CNPC, with partners Total (18.75%) and Petronas (18.75%), is
believed to have completed the drilling of 98 wells at the field
As of late 2014, oil production was averaging 200 kbpd after the second
development phase was brought on-stream
This second phase involves the drilling of 60 additional wells and construction of
a processing facility and pipeline
Preliminary work has also commenced on the third phase of the development
which will increase the production capacity to 400 kbpd
The forward plan is to drill 300 wells at the field within 5 years
Recent Re-negotiation of TSC/DPSCs
Reductions in peak production targets and extensions of TSC/DPSC duration now
being sought
LUKOILWest Qurna2 (agreed on 17/1/13) with further addendum in June 2014
for Tuba-Fao pipeline
ENIZubair(agreed on 15/7/13)
ExxonMobil West Qurna1 (agreed on 30/1/14)
Statement from ex-Deputy PM for Energy that all other 2009 TSC/DPSCs will
need to be re-negotiated
Prospects for new licensing round

Iraqs fifth licensing round for oil exploration will be held in the near future and will come from 10 oil blocks, its oil minister said in
2013

Less attractive service contracts from Baghdad combined with a recent boom in natural gas supplies and gas finds elsewhere in the
world may have further quashed investor interest in a tricky gas prospect like Iraq

After Iraq's fourth energy auction ended with few foreign investors tendering bids, this could force Baghdad to ease tough contract
terms to lure more oil explorers into a new bidding round that should focus on gas, while the oil will be used to boost reserves

The Oil Ministry announced on May 27, 2013 that Iraq chose ten patches exploratory distinct gas to oil licensing round fifth coming
that will be announced later after the completion of legal and technical procedures on it

Delays on launching the 5th round is apparently due to work on the licensing round for the Nasiriyah project (oilfield and refinery)
and ongoing contract renegotiations

We expect an announcement on structure and terms during the next year

41
Huge potential for gas production

Iraq gas assets overview Iraq has world class gas fields with massive reserves
Bcf
Iraq's proved natural gas reserves were the 12th largest in the world 9,000
at almost 112 TCF, but much of the gas is flared or not used 8,000
Iraqi gross natural gas production was 724 Bcf in 2012, of which 7,000
423 Bcf (58%) was vented and flared 6,000

In 2011, Iraq was ranked as the 4th largest gas flaring country in 5,000
the world 4,000
3,000
75% of Iraq's natural gas reserves are associated with oil, most of 2,000
which lie in the supergiant fields in the south 1,000
0
Limited gas infrastructure has left gas-prone exploration untouched

Development has been hindered by a lack of infrastructure and now Iraq wants to ramp up gas production

mmcf/d
Plans to export natural gas remain controversial because natural gas
is needed as fuel for Iraq's electric power plants 1,800
The current shortage of adequate gas has resulted in idle and 1,600
suboptimal electricity generation in Iraq
1,400
Prior to the 1990-91 Gulf War, Iraq exported natural gas to Kuwait 1,200
The gas came from the Rumaila field through a 105-mile, 400 1,000
mmcf/d pipeline to Kuwait's central processing center at
Ahmadi 800

The Ministry of Oil has discussed reviving the mothballed 600

pipeline, but no firm plans have been made to do this 400
The Iraqi government has also considered proposals to build a 200
transcontinental pipeline to export natural gas to Europe via
nearby countries, but there are no firm plans -
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

42 Source: Wood Mackenzie and U.S. Energy Information Administration, Iraq Oil Report, and Middle East Economic Survey
if gas processing facilities are built

Siba and Mansuriyah gas projects Basra Gas Project

Kuwait Energy was awarded 20 year term gas development contracts for
Siba (Basra Governorate) and Mansuriya (Diyala province)gas fields in
Iraqs third bidding round
Kuwait Energy will be the operator of Siba, participating with a 60%
contractor share and TPAO participating with 40%
Successful remuneration fee for Siba was $7.5/boe with a plateau
production target of 100 mmscfd
TPAO will be the operator of Mansuriya, participating with a 50%
contractor share, Kuwait Energy 30% and Korea Gas Corporation 20%
Successful bid was $7/boe with a plateau production target of 320
mmscfd
$400mm are being spent to drill wells and build pipelines and surface
facilities at the gas fields
Gulfsands Petroleum failed Maysan gas project
The Basra Gas Company (BGC) is a $17.2 bn JV set up in Nov-11 to
gather and process gas from the three southern oilfields of Rumaila,
West Qurna 1, and Zubair
Owned by the Iraqi South Gas Company (51%), Shell (44%) and
Mitsubishi (5%)
The plant began operations in Apr-13 year with an initial capacity to
produce 400mmcfpd, but once completed in 2017, the project will
process 2bcfpd
Planned petrochemical facilities

Gulfsands signed a MoU in Jan-05 with the Ministry of Oil in Iraq for
the Maysan Gas Project in Southern Iraq, following completion of a
feasibility study on the project
The project involved the engineering, procurement, construction and
operation of a gas gathering system, gas liquids plant and power plant to
gather, process and transmit natural gas which would otherwise be
flared as a waste by-product of oil production
Signature of a definitive contract has been delayed for years due to
Ministry of Oil focussing on bid rounds for the development of super-
giant oil fields in the south before being abandoned
Royal Dutch Shell signed a MoU in 2012 with the Iraqi government to
set up a major petrochemical facility in the city of Basra
In Jan-15, the deal was announced by Industry Minister Nasser al-Esawi
saying the complex would make Iraq the largest petrochemical producer
in the Middle East
The $11 bn ethane-cracking facility entitled Nebras would produce
ethylene, which is used in making plastic and is expected to come on
line within five to six years

Ongoing gas projects have been slow to materialize

43
1. Oil Sector Overview ##

2. Infrastructure Overview ##

3. Upstream activity and licensing history ##

4. Political challenges ##

5. Future opportunities in Iraq ##

6. Appendix ##
Key issues in Iraq
Concerns Mitigation

Absence of unified position between KRG & Central Government leads to Major changes in current policy post-2014 elections: review of fiscal
erratic oil policies / Revenue-sharing issues (federal-Kurdistan-provinces) system, with possible entry of independent and specialized IOCs

Legal

Hesitancy in oil reforms contributes to increased corruption and insecurity Pending oil law reforms
/ Prone to significant political uncertainties, incoherent and unpredictable
policy directions

Insecurity and sectarianism US led coalition providing training and funding to Iraqi military to ensure
Security

Risk of involvement in political turmoil and violence safety

Delays and downward revision to plateau targets Power investment program started
Power shortages Refinery investment program started
Operational

Gas flaring high

Absence of key infrastructure
Lack of downstream strategy
Lack of export competitiveness due to geography

TSC Contract terms New field exploration and development with sweeter economic terms
Struggle attracting foreign investment and IOCs Largely successful achievements of around 60% of production targets since
Contractual

Unsustainably low/misaligned contractor incentives given scope of 2010

development challenges Attracted major IOCs under unprecedented levels of government take
Poor regulatory networks ensure hegemony of NOC over IOC, through Recent contract renegotiations with existing companies
higher profit margins and lower risk and costs for the NOC

Inefficient & bloated bureaucracy New PM and Minister seeking to streamline bureaucracy
Governmental

Long negotiation phase and project delays New contractual and fiscal terms under review
High government take low attractiveness & mismatched incentives

45
WPG Contracts

In Dec-11, Oryx Petroleum acquired a 50% shareholding in KPA

KPA has an indirect 75% participating interest, Amira Hydrocarbons holds the remaining 25% participating interest (Petrel Resources has acquired a 20% interest in Amira in Sep-13, giving it an
effective 5% carried interest)

Consideration for the 50% shareholding in KPA acquired by Oryx Petroleum included:
An agreement for KPA to fund Amira Hydrocarbons 25% share of all costs under the WPG Contracts until first production (with such carry to be repaid from cash flow from any future
production)
Oryx Petroleum agreeing to fund KPAs first $65mm of expenditures (inclusive of the 25% carried interest of Amira Hydrocarbons);
KPA paying Amira Hydrocarbons bonus payments upon achievement of key operational milestones of up to a total of $11mm

Oryx Petroleum is the contract operator with regard to the 3 contracts with the WPG to explore and develop hydrocarbons in the Wasit province:
An Asphalt Exploration Contract,
A Seismic Option Agreement
A Risk Exploration Contract (REC)

If Oryx Petroleum exercises the KPA Option and the WPG exercises the WPG Back-In Right, then as a result of its shareholding in KPA, Oryx Petroleum will have a 50% participating interest (40%
working interest) in the WPG Contracts

Pursuant to the KPA Option, if Amira Hydrocarbons subsequently obtains equivalent oil and gas contracts in another specified Iraqi province, then Oryx Petroleum must elect to either
relinquish the additional 16.66% shareholding obtained by it on the exercise of the KPA Option; or
retain its additional 16.66% shareholding but lose its right for KPA to participate in such specified province in Iraq

The Seismic Option Agreement grants non-exclusive rights to acquire 2D seismic data on behalf of the WPG over any part of the Wasit province up to a total of 7,000km
The initial term of the Seismic Option Agreement is five years, expiring in September 2016, with an option to extend for an additional five years
Pursuant to the Seismic Option Agreement, KPA can nominate non-contiguous areas totalling up to 3,500 km2 to be Contract Areas governed by the terms of the REC
KPA also has a right of first refusal should the WPG offer to award any petroleum license in the Wasit province to third parties prior to the full 3,500 km 2 being nominated by KPA
KPA is entitled to 50% of the revenues from any sale of the seismic data it acquires on behalf of the WPG up to a cap of 125% of the cost of acquiring the seismic data incurred by KPA

The Wasit REC provides KPA with the right to conduct all exploration, gas marketing, development, production and decommissioning operations relating to petroleum in nominated Contract Areas
At present, no Contract Areas have been nominated by Oryx Petroleum
Each nominated Contract Area would be deemed to be a new REC, and the WPG is granted the WPG Back-In Right to acquire up to a 20% participating interest in each Contract Area so
nominated by KPA
Existing producing regions within the Wasit province are excluded from the Wasit REC

The Asphalt Exploration Contract provides KPA exclusive rights to mine heavy oil, asphalts tar and bitumen (less than 25API) throughout the Wasit province
During the initial four year evaluation and pilot phase, KPA has committed to conduct studies, collect seismic data and potentially construct an asphalt production plant (if commercially feasible)

46 Source: Oryx Petroleum IPO Prospectus

Wasit Province

Background Map

The Wasit province is located in east central Iraq in close proximity to

the super-giant East Baghdad field

17,153 km2 in size (representing 4% of the land mass of Iraq)

There are several international oil companies operating in the Wasit

province and some transport infrastructure is under development to
connect fields in the Wasit province with pipelines in southern Iraq that
connect to the port of Basra
OAO Gazprom, which was awarded development of the giant
Badrah field, is tendering for a 165km, 24-inch, oil pipeline to the
Garraf oil field in southern Iraq where it will connect to a pipeline
to Basra, as well as a gas gathering and treatment station, a gas
pipeline, infield pipelines and field infrastructure

The Wasit province is underexplored, with only five exploration and

appraisal wells drilled to date by third parties and limited vintage 2D Wasit License Area Development Plan
seismic data

All five exploration and appraisal wells drilled by third parties in the
Wasit province to date have been successful: The development of
the leads in the Wasit
two wells on the Badrah field province would
consist of 95 oil
two wells on the Ahdab field producing wells and
one well on the Dufriyah field 12 injection wells
The three discovered but undeveloped oil fields have an estimated Gross Capex over the
1.3bnbbl of reserves life of the Wasit
province license are
CNPC (Ahdab field), OAO Gazprom (Badrah field), Lukoil OJSC and estimated by NSAI to
Pakistan Petroleum Limited are already present in the Wasit province be $9.5bn with
under contracts with the Iraqi Federal Government average gross Opex of
approximately
$12/bbl
By contrast, Oryx Petroleums contracts in the Wasit province are with
the WPG

47 Source: Oryx Petroleum IPO Prospectus

Key contractual terms under the Wasit REC license
Oryx Petroleum Participating Interest 50%
Oryx Petroleum Working Interest 40% Assuming Oryx Petroleum exercises the KPA Option and the WPG exercises the WPG Back-In Right
WPG Working Interest 20% Assuming Oryx Petroleum exercises the KPA Option and the WPG exercises the WPG Back-In Right
Exploration Period
Initial Sub-Period 3 years from contract area nomination date
Commitment Seismic/Studies, 1 well
Second Sub-Period 2 years
Commitment 1 well
Extensions Two 1-year extensions
Development Period 20 years + 5 years
Regional/Provincial Royalty 10%
Cost Recovery Limit
Oil and associated gas 45%
Non-associated gas 55%
Cost Pools (100%) as at December 31, 2012 $6mm
R<1: 40%
Contractor Share of Profit Oi 1<=R<2.5: Straight line
R>=2.5: 20%
Annual Lease Payments per km 2
Exploration Period $10
Production Period $100
Production Bonus Payment
Start $1mm
10 mmbbl cumulative $2.5mm
25 mmbbl cumulative $5mm
50 mmbbl cumulative $10mm
Other Payments to WPG per annum
Exploration Period $50k to $150k $150k in the first year, $100kin each of the second and third years, and $50k per annum thereafter
Development Period $100k
Contingency Payments to Partners $11mm One time bonus payments by KPA to Amira Hydrocarbons upon achievement of certain operational milestones
One time signature bonus and capacity building payments due within 30 days of acknowledgement of contract area
nomination
Both signature bonus and capacity building bonus are equal to the contract area nomination (km2) divided by the total
Other Payments to Region/Province $7mm area (3,500 km2) and multiplied by $3.5mm
Assuming nomination of the full area (3,500 km 2), signature bonus and capacity building bonus are equal to $3.5mm
each
Payments will be reduced pro-rata if the full area is not nominated
Government Carry KPA carries the WPG through to exploitation
KPA funds Amira's 25% share of all costs under the
WPG Contracts until first production
Under the agreements with its partners, Oryx Petroleum is obliged to carry KPAs first $65 million of expenditures
(with such carry to be repaid from production)
Partner Carry (inclusive of the Amira Carry)
Oryx Petroleums remaining carry of KPAs
The $59 million shown is the remaining obligation of Oryx Petroleum as at December 31, 2012
expenditures (inclusive of the Amira Carry) is
$59mm

48 Source: Oryx Petroleum IPO Prospectus