Actuality, November, 13, 2007

They have got an access to Kurdistan oil deposits.

This is for the first time after Saddam Hussein regime falling in Iraq

that the company with the Russian investments has got an access to oil and gas resources of the country.

The Kurdistan authorities have informed about the  PSA agreement signing with Norbest Limited (that is close to TNK-BP). It is about the Russian company stockholders structure. The branch experts consider that the project prospect can warrant its high risks.

The Iraq Kurdistan government has declared that the oil and gas regional council has concluded five treaties on production section for oil and gas

regional deposits development. Within one of the treaties four license parts in the agreement zone Hauler with the area

of 1500 sq.

km in the Erbil region will be developed by Norbest Limited, “that is TNK-BP subsidiary”, it is informed. Norbest has received the largest part of the distributed ones. One of the parts borders on

the largest deposit Kirkuk. The production risks are estimated there as average and low ones. Korean KNOC, British Sterling Energy, American Aspect Energy and Hillwood International Energy have received the rest four parts.

However, it has been informed in TNK-BP that the Norbest company has nothing to do with the holding. The sources familiar with the situation, have told that the project is the private TNK-BP stockholders’ initiative. Andrey Shtorkh, the Victor Vekselberg representative, has declared that the businessman is not related to this project.

The source that is close to TNK-BP owners has pointed out, that the Alfa Group stockholders’ structure is going to work in Kurdistan (it owns 25% in TNK-BP). According to this person, Norbest was set up directly to work on deposits areas and to participate in tenders. There are no BP structures among the company owners. It is also added that such structure is necessary for the political risks minimization.

If Alfa Group really participates in the project then its unwillingness to admit its Norbest connection is easy to explain (the company has large investments in Turkey, the authorities of which threaten to carry out a military operation in Kurdistan). In Turkey the group has 13,2 % of Turkish telecommunication company Turkcell.

Its capitalization makes up $17 bln. In June, 2007 one of the Alfa Group subsidiaries acquired almost 52% of AFM Uluslararasi Film Produksiyon stocks (that is one of the largest Turkish film-theatrical operator) . In September Alexey Reznikovich, the head of Alfa Group Altimo telecommunication subsidiary, has promised that Alfa Group will soon increase its presence in the Turkish market.

According to the Kurdistan government information, TNK-BP service contract for deposits work was simultaneously signed.

A number of documents that concerned the structure projects, affiliated with the Russian TNK-BP owners, were signed at the same time with the Russian consulate general opening. Norbest refused flatly to inform anything.

They explained only that within a few days new information on the Kurdistan project essence would be announced.

TNK-BP informatory points out that in Kurdistan the assets value is not properly estimated. “It is supposed that it will increase by several times.” Risks, according to the interlocutor, are not significant.

The American, South-Korean and British company participation in Kurdistan projects has been supported by these countries politicians. This situation is not considered as the government conflict between Kurdistan and Iraq. “The Kurdish autonomy exists since 1974. It always used its rights even during the Saddam Hussein’s government. Really it will allow only to stabilize the situation in Iraq

on the whole”, agrees the Kurdistan government person.

The federal Iraq oil law is not passed yet; though it was supposed that it would happen up to the end of September. The law absence prevents the companies that want to work in Iraq, especially, Lukoil. In 1997 the company received the right for the deposit Western Kurna-2 development on PSA conditions. Then the Saddam Hussein’s government suddenly broke off the contract that Lukoil did not accept. In September Hoshiyar Zibari, the head of Iraq Ministry of Foreign Affairs, offered Lukoil to take part in the new tender, but, considering already made investments, with certain preferences.

But on August, 9 the Kurdistan regional oil and gas law, where there were the main PSA creation aspects described, was passed. According to it, all PSA are typical. Its terms suppose that Iraq would receive 85% of profit and about 15% would receive the operator. The Kurdistan government has also the right to increase the Iraq profit share, and also to transfer the state share part to the Iraq and other international companies. The regional government has already distributed seven parts from the law passing moment. The first contract has received the American Hunt Oil company, the management of which is considered to be close to the Bush’s family. Small American Hyperion Resources with the son-in-law of the Hunt Oil founder son at the head has recently offered the Russian “Tatneft” to cooperate in Iraq.

The informatory, close to TNK-BP explains, that the Iraq government oil law negotiation will not influence

the Norbest contract work. It is signed within the Kurdistan local legislation, the legitimacy of that is not challenged by the Iraq government. “There is no sense to wait the situation end with the return or non-return to Iraq, for example, Lukoil. If it is possible to work there now then it is necessary to do it right now”, marks the person.

The branch experts agree.

In spite of the existing risks, including political ones, the project can turn out to be a very promising one. In fact, in Kurdistan and the western Iraq there are two thirds of Iraq oil supplies”, points out Denis Borisov, the IFC Solid analyst.

“Probably, the price (paid for the assets) and project profit prospects ratio suits the investor and counterbalances the risks”. Oil rem ains

a very attractive business. It is enough to look at its price growth diagram. He marks that if the company joins the project on the PSA terms then this is, most likely, not a speculative investment.