Petrel Resources PLC
27 March 2006
Petrel operational update on Iraqi activities
Petrel Resources plc (AIM:PET), the London AIM-listed company working in the
Iraqi oil industry, announces an operational update:
Subba & Luhais Oil Field Development project is moving ahead
• Project personnel mobilised
• Engineering work underway at Petrel offices in Europe
• Joint Venture with local partner
• Letter of Credit opened and activated
• No insuperable security problems encountered
Project Personnel Mobilised and Engineering Work Underway
During March Petrel and partners held technical meetings with the Iraqi Ministry
of Oil State Company for Oil Projects (SCOP) to present design work to date and
to review our overall schedule.
Early mobilisation of our Engineering Team allowed Petrel to progress ahead of
schedule. Processing and design conditions were agreed.
Prior involvement of major suppliers (such as Gas Compression Systems) confirmed
the technical and commercial basis of supply as we had originally tendered. We
anticipate placing long lead orders during the 3rd quarter of 2006.
SCOP also confirmed their desire to utilise the associated gas produced from the
Luhais field - rather then the historical method of flaring. Accordingly we
established a Work Group to prioritise and expedite plant deliveries to achieve
early revenue. This will also provide environmental and operational benefits.
This confirms official confidence in our abilities and commitment to help
develop the Luhais and Subba oil fields.
Our focus is now twofold; on design definition as part of our Front End
Engineering Design program for SCOP review and acceptance in the 3rd quarter of
2006 and, secondly, in securing equipment and delivery conditions for the Long
Lead items and pipeline material.
Letter of Credit opened and activated:
We agreed with the Iraqi Ministry of Oil (SCOP) and the Trade Bank of Iraq (TBI)
the conditions and procedures for the issue of the Project Letter of Credit (LC)
from the TBI that made available the circa US$20 million advance payment. This
will also provide acceptable collateral for further payments from TBI and
issuance of subsidiary Letters of Credit to our major suppliers.
We set up a trading account with the TBI to handle finances on behalf of the
Ministry of Oil. Our Joint Venture partner submitted the necessary collateral
for Performance Bonds and Bank Guarantees.
Joint Venture with local partner progressing well:
As previously announced Petrel established a joint venture with a large Iraqi
group, Makman, to develop the Subba and Luhais project.
Together we have established structures and responsibilities within the Joint
Venture Company. We have mobilised personnel to the Project offices in Baghdad,
London, Italy and Istanbul with support from our own corporate office and
Makman's office in northern Iraq.
Our Iraqi partners bring local contacts and experience. Makman has almost
completed detailed design on two other oil field projects in Iraq and are now
placing purchase orders for these. We expect this knowledge and experience to
reduce our project risks and cost.
Petrel Managing Director, David Horgan summarised:
'Our project development is proceeding according to plan. Petrel has attracted
excellent partners and suppliers. We have built a team experienced in
overcoming technical challenges in fluid environments. The project is fully
staffed and work is underway.
There are risks but they are manageable. Petrel has expanded its presence in
Baghdad and elsewhere in Iraq. The Subba & Luhais Project provides an
infrastructure for advancing all our activities in Iraq.
The Iraqi authorities continue to give encouragement and support. We look
forward to the formation of the national government following successful
elections with a high participation rate.
We have encountered no insuperable security problems'.
Contacts:
David Horgan + 353 87 292 3500
John Teeling + 353 1 833 2833
Jim Finn + 353 1 833 2833
Bell Pottinger Corporate & Financial
Nick Lambert +44 (0)7811 358764
Rowan Dartingon
Barrie Newton +44 (0)117 933 0011
This information is provided by RNS
The company news service from the London Stock Exchange ZM