Operator takes reins of Kurdish gas field expansion

The consortium that operates the Khor Mor gas field in Iraq's semi-autonomous Kurdistan region has issued a termination notice to the Canadian contractor it hired to increase production capacity.

The Pearl Petroleum consortium issued the notice to Toronto-listed Enerflex on 19 August after "numerous performance issues" during the execution period of the $806mn engineering, procurement and construction (EPC) contract, according to consortium member Dana Gas.

"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," Dana Gas said.

Abu Dhabi-listed Dana Gas is one of five companies in the Pearl Petroleum consortium — the others are Sharjah-based Crescent Petroleum, Austria's OMV, Hungary's Mol and German utility RWE.

Pearl Petroleum will now take direct control of the expansion project to ensure "it is brought back on track and completed in the timeliest manner", Dana Gas said.

The project, which will boost capacity at Khor Mor by 250mn ft³/d to 750mn ft³/d, had been due to deliver first gas in April this year but missed that deadline.

All of Khor Mor's gas production to date has been used for power generation in Iraq's Kurdish region, although the Kurdistan Regional Government (KRG) has toyed with the idea of exporting gas. "We will become a net exporter of gas to the rest of Iraq, Turkey and Europe in the near future," KRG prime minister Masrour Barzani said back in 2022, not long after Russia's invasion of Ukraine.

As well as the delay to the capacity expansion project, these ambitions have been undermined by repeated drone attacks on Khor Mor in recent years, which often disrupt its production. No group has claimed responsibility for the attacks, but officials typically attribute them to pro-Iran groups within federal Iraq.

Iraq has relied on gas import agreements with Iran for several years, and the two countries agreed on a new 50mn m³/d gas supply deal earlier this year. Washington has issued sanctions waivers to allow Iraq to import electricity and natural gas from Iran ever since former president Donald Trump's administration reimposed restrictions on Tehran's energy sector in 2018.

Iraq relies on Iran for about a quarter of its energy needs, compared with 40pc three years ago, according to the US State Department. The US sees Iraq becoming self-sufficient in energy by 2030.

By Bachar Halabi