History of hydrocarbon exploration in the Kurdistan Region of Iraq (2)

The first exploration well in the Middle East was drilled in 1901 on the Chia Surkh structure close to the present-day border with Iran in the southeastern part of Kurdistan (Figure 1). The well was located on a hill close to an active oil seep and it was abandoned with oil shows after drilling to 710 m in depth. Between 1905 and 1922 four more wells were drilled on the structure, some finding oil shows with none of them drilling below 800 m (Aqrawi et al., 2010). During the next 83 years (1922–2005) less than 30 wells were drilled in Kurdistan and these only targeted seven structures; Chia Surkh, Pulkhana, Kor Mor, Khurmala Dome, Chemchemal, Taq Taq, Demir Dagh and Jabal Kand (Figure 2).

During this same period a number of significant discoveries were made both in the central part of Iraq and in the Zagros of Iran. The first significant discovery in the Middle East was made in 1908 at Masjid-i-Suleiman in the Zagros of Iran (Sorkhabi, 2008; Figure 1). The Kirkuk Field was discovered in 1927 by the Turkish Petroleum Company (later to become the Iraq Petroleum Company, IPC). The discovery well (Baba Gurgur-1) encountered oil in the Cenozoic and blew out, taking a number of days to control. The discovery well was located on a surface anticline and close to a natural gas seep: “The Eternal Fire of Baba Gurgur” (father of fire), which is believed to have been active for more than 4,000 years. Some of the other discoveries in Iraq include: Qaiyarah (1928), Rumaila (1953), West Qurna (1973), Majnoon (1975), East Baghdad (1976) (Figure 1). The Khurmala Dome, at the northwestern end of Kirkuk, was first drilled pre-second World War but it was plugged and abandoned, along with other wells, as European troops approached Egypt in the early 1940s. During the Iran-Iraq war (1980–1988) exploration and appraisal drilling continued in Iraq, albeit at a much reduced pace. A comprehensive summary of the history of oil exploration in Iraq is given in Aqrawi et al. (2010).

The Taq Taq structure in the central part of the Kurdistan Region of Iraq (Figure 2) was first drilled in 1960 and drilling was suspended in April 1961 after setting 9^5/8 inch casing in the top of the Upper Cretaceous Shiranish Formation. This followed the issuance of Public Law 80, which took away 99.5% of the IPC’s ownership (Falola and Genova, 2005). In 1964, the government established the state-owned Iraq National Oil Company (INOC) to develop the concession areas taken over from IPC. Sixteen years later in 1978, INOC decided to re-enter the Taq Taq-1 Well and it was deepened to the Lower Jurassic, testing oil from a number of formations within the Cretaceous. In 1979–1980, INOC contracted a rig to drill more wells on the discovery (Taq Taq-2 discovered oil in the Eocene Pila Spi Formation), but tensions between the Kurds and the Baath regime, coupled with the outbreak of the Iran-Iraq war, led to a cessation of drilling. In 1994, the Kurdistan Regional Government (KRG) tested and completed Taq Taq-1 and Taq Taq-2 signalling the first production from Kurdistan. Prior to the Iraq War of 2003, the Turkish company Genel Enerji AS signed the first production sharing agreement in Kurdistan (KRG, 2002). This contract was for the Taq Taq Field. Soon after another Turkish company, Petoil Petroleum, together with US-based Prime Natural Resources were allocated areas to explore (KRG, 2003). These contracts signalled the start of a new phase of exploration activity in Kurdistan.

Following the Iraq War in 2003, more international oil companies started to approach the KRG and undertake technical work in the Kurdish autonomous region. At this time, neither the Constitution of Iraq nor the Oil Law had been passed and there were ongoing disputes regarding revenue sharing between the KRG and the Iraqi Central Government (ICG). The Kurdish Ministry of Natural Resources (MNR), which at this stage comprised only a handful of people, drew up a ‘block map’ of the region nominally assigning one surface structure per block. The 48 blocks were ranked into low, mid and high risk and fiscal terms varied to reflect perceived technical risk. In addition, 8 lettered blocks were delineated along the border with Turkey and Iran (Figure 2).

In addition to the political risk, there was a paucity of subsurface technical data specific to Kurdistan and no service sector. Prior to the Iraq War in 2003, very few exploration wells had been drilled in Kurdistan (Figure 2). There was virtually no seismic data, and what wells and seismic data were available, avoided the more mountainous areas and were generally close to the existing Iraqi oil fields. Moreover, even if one knew of the possible existence of subsurface data, getting access to it was often extremely difficult.

The Iraq Lexicon (van Bellen et al., 1959-2005) has proven to be an invaluable source of data on the lithostratigraphy of Iraq, incorporating four decades of field surveys and investigations. Local geologists and students have produced theses on the surface structure, stratigraphy and hydrogeology. Whilst providing a rich source of information, in the absence of an oil industry, there had been little focus on petroleum systems and what little data was available needed extrapolation into the subsurface.

There were no data packages and there was no formal bidding process in the early development of the oil industry (2002–2006). The negotiation between the Ministry of Natural Resources and oil companies largely revolved around the location of the block(s) in question and the cash bonus payable on entry. Work programmes generally consisted of geological fieldwork, 2-D seismic acquisition and one exploration well to be completed within the first 3 years, plus a second exploration well within the second two-year term of the Production Sharing Agreement (PSA, sometimes referred to as a Production Sharing Contract, PSC). This was a tight time frame given the paucity of infrastructure and service sector support in the early years. By 2007 the Ministry of Natural Resources had produced a ‘formal’ block map (Figure 2) and indicative fiscal terms. Competition for blocks was great, particularly in the period from mid-2007 to mid-2008 when almost half of the available blocks were signed. Block awards favoured those companies that were willing to invest resources in early fieldwork, data collection and its analysis, and make early commitments to the KRG, not to mention taking some political and technical risk. Despite the discontinuity of almost three decades of exploration inactivity and the proximity of Kurdistan to the world-class oil fields discovered in Iraq, Iran and northeast Syria; there were still technical concerns. Kurdistan was classed by many as frontier, wildcat territory.

Significant oil seeps are known in Iraq (e.g. above Kirkuk) and are present across Kurdistan. In some cases flows of oil can be seen on the surface. Significant oil seeps are evident above the Tawke Field (Carstens, 2006); at Gelli Keer above the Shaikan Field (Figure 3a); at Gelli Zonta (Figure 3b) and in the Bekhme Gorge (Csontos et al., 2011). Oil seeps have also been recorded above, or in close proximity to, many of the prominent surface structures such as Bina Bawi, Sangaw, Chia Surkh, Kurdamir and Qara Dagh (Figure 4).

In some areas, particularly during the summer months, oil can be seen seeping from outcrop-scale fissures, vugs, bedding planes and pores. Some of these natural seeps are thought to be a result of leakage via faults (e.g. above the Tawke Field and at Gelli Zonta), whilst some of the oil-saturated carbonates seen at the surface are almost certainly exhumed oil accumulations (e.g. the Eocene Pila Spi Limestone above the Shaikan Field).

Whilst a number of workers were encouraged that the seeps demonstrated the presence of an underlying mature source rock, others were concerned about traps having been breached and hydrocarbons having leaked away. Significant leakage has undoubtedly occurred and is still occurring today. However, large hydrocarbon accumulations have since been discovered below many of these seeps suggesting that the rate and volume of seepage, in some structures, is largely insignificant compared to the volumes that have been generated, trapped, and are probably still being generated today.

Exposure of pre-Cenozoic sediments and in particular the absence of the Miocene Fars Group evaporites was for a number of workers, a ‘play killer’. It was thought that a Fars Group ‘super seal’ was required to preserve subsurface accumulations and as such, some companies were discouraged by the presence of Cretaceous and Jurassic sediments at surface with the belief that no older accumulations were possible. This was a concern in fact, first raised in the early 1950s (Baker and Henson, 1952). Consequently, many companies avoided the fold belt in Kurdistan altogether and focused on the Cenozoic-covered plains (Figure 4). With the benefit of almost a decade of exploration activity it is clear that a number of very competent seals (shales and anhydrites) exist in the pre-Cenozoic stratigraphy and these have facilitated the presence of significant hydrocarbon accumulations in the Cretaceous, Jurassic and Triassic. Although probably beneficial, there is no essential requirement for a Cenozoic ‘super seal’ (Figure 5).

Early entrants came armed with commercially available (and sometimes free) satellite imagery such as Landsat and Google Earth. Published geological maps gave an excellent overview of the surface geology of Iraq and Kurdistan. However, they were at times inaccurate, particularly in the more remote and structurally complex areas. A typical workflow for this data is given in Figure 6. Important aspects of this early work were to calibrate satellite image data, to identify the main structural elements and their possible impact on the structure and stratigraphy, and to establish the age of the oldest exposed sediments in the core of the anticline in question. Given the intensity of weathering, recrystallisation and lithologic variation, biostratigraphic age dating was often indeterminate. Even where good fossil recovery was obtained there were often differences of opinion as to precise age dates and lithostratigraphic assignation.

Geochemical evaluation of potential source rocks and surface oil occurrences provided an indication of thermal maturity and source potential. It was considered that the Middle Jurassic Sargelu Formation and the Upper Jurassic Naokelekan Formation had yielded the bulk of the oil that had charged reservoirs in the Mesopotamian Basin and Zagros fold belt (Pitman et al., 2004). It was also clear that compositionally distinct oils, considered to have been sourced from the Triassic, have also been generated in northern Iraq and Kurdistan (Al-Ameri and Zumberge, 2012).

Once awarded acreage, operators generally undertook additional field mapping, sampling and structural reconstructions (Figure 7). The aim of these studies was to develop a robust geological and structural model of the acreage and thus enable an initial assessment of the hydrocarbon prospectivity. Most of this early work had to be undertaken within the first 12 months so that 2-D seismic acquisition could be undertaken during the summer months of the second year and drilling in the final year of the first three-year term. 2-D seismic data has now been acquired over all blocks except for those in the far east/northeast beyond the main Zagros thrust. All initial new field wildcat exploration wells in Kurdistan have been drilled on 2-D seismic data. These lines show considerable variation in data quality, which is often seen to degrade where hard carbonates are exposed at the surface and in regions of structural complexity. Beyond the mountain front this has frequently meant that the crests of anticlines are often poorly imaged but the flanks, with Cenozoic cover, have good imaging. With nearly all exploration wells being crestally located this has often meant some uncertain and difficult drilling (Figure 8).

In the absence of seismic data, the ‘Busk method’ (also known as the concentric arc method) was used in an attempt to extrapolate surface dip and strike measurements into the subsurface (Busk, 1929). Whilst this proved to be a useful geometric exercise, it assumed stratigraphic uniformity and was unable to take into account any significant tectonism or crestal accommodation in box fold type structures.

Although a limited number of production sharing agreements (PSA) on existing discoveries were signed in 2002 and 2003, the first new exploratory drilling was undertaken by Norwegian company DNO (Det Norske Oljeselskap AS) who signed a PSA with the KRG in mid-2004 (DNO, 2004; KRG, 2004). Following fieldwork, the company acquired 450 km of 2-D seismic data and spudded the first well in Kurdistan for over a quarter of a century on November 28, 2005 (DNO, 2005a). The well was located within an elliptical anticlinal surface feature in the northwestern part of Kurdistan (Figure 9). By late 2005 it was announced that Tawke-1 had encountered 24° API oil at a depth of 350 m (DNO, 2005b). By mid-2006 the well had drilled to a total depth of just over 3,100 m in the Jurassic and flowed at a restricted rate of 5,000 bopd from Cenozoic limestones (Harstad et al., 2010).

Later that same year, the first new exploration activity took place on the Taq Taq Field under the operatorship of the newly formed Taq Taq Operating Company (TTOPCO) a joint venture between Genel Enerji AS and Addax Petroleum Corporation. 2-D seismic data acquisition commenced in early 2006 and the first new well (Taq Taq-4) spudded in May 2006 reaching total depth in December 2006. The well flowed an aggregate of 29,600 bopd from three different Cretaceous reservoirs (Addax Petroleum, 2009).

The success of Tawke and Taq Taq accelerated competition in what was already a competitive environment. By early 2006 seven PSAs had been signed and six companies had commenced exploration activities (Figure 9). Within a year almost half the blocks south and west of the mountain front had been signed, each one to a new operator; there were now some 13 operators on 15 blocks. In an eleven-month period between September 2007 and June 2008 some 18 new PSAs were signed (Figure 9). Whilst some of the entrants were ‘small’ in terms of their market capitalisation, some larger oil and gas companies had by this time negotiated contracts (e.g. MOL, Reliance, Hunt and Talisman). Blocks were signed across the region with little apparent preference, by industry as a whole, for either the northern or the southern part of Kurdistan. Whilst most companies came in search of oil, some focused on gas and associated liquids. In early 2007, Dana Gas entered into agreements with the KRG to develop, process and transport natural gas and condensate from the Kor Mor gas field (Dana Gas, 2014). This was the first gas development in Kurdistan.

By late 2009 around 20 new exploration and appraisal wells had been drilled in Kurdistan. New discoveries included; Tawke, Bina Bawi, Sarqala, Miran, Barda Rash, Shaikan, Kurdamir, Jabal Simrit and Bijell. Continued expansion of the service sector (drilling and logging contractors) and improvement in infrastructure (roads, communications, local work force) has helped maintain significant drilling activity from 2010 onwards with an average of over 20 exploration and appraisal wells drilled per year (Figure 10). This also coincided with the third year of the first term for many of the PSAs that had been signed in 2007 by the end of which almost all companies were required to have drilled at least one exploration well.

The current block map shows that of 64 blocks, 49 are licensed with 25 different operators (Figure 11). Relinquishment, of whole blocks and part blocks, is now resulting in a steady turnover of acreage. Companies that signed PSAs in the early years (2003–2006) were largely dominated by smaller players. Over time and with continued success, larger independents, majors and super majors have entered the region and have begun exploring. In parallel, some of the smaller players have either exited without success or have been ‘taken over’. Although there are a few ‘open’ blocks, the region has seen active deal flow with some new entrants willing to buy into existing discoveries or exploration blocks. Of the 64 licensed blocks, over half have significant discoveries and technical success rates for new field wildcats, as defined by the authors as flowing in excess of 500 bopd on test, are estimated to be around 63%.