Repsol’s Experience in Iraq: “Falcon Security is Doing a Fantastic Job”

First of all can you tell us a bit about Repsol and your activities?

We are Repsol, a Spanish international oil company that has been working in Kurdistan since July 2011. We have two blocks in the Kurdistan, both in the exploration stage. Actually, drilling our first well in Piramagrun licensed block. We have already performed seismic and other exploration activities in both Piramagrun and Qala Dze licensed blocks.

What do you think of the success story of oil and gas here?

In fact success rates are incredible. There is lots of potential in Kurdistan blocks; the success of exploration is really amazing. So we are here, trying to be another company to follow the route of the discoveries. We have a very good acreage in Qala Dze and Piramagrun blocks in Kurdistan, a frontier area where we hope to make a commercial oil discovery. We strongly believe in it.

In terms of your production, what is the outlook?

We are not producing yet, but our aim is to find our reserves in Kurdistan which will allow the company to start the production stage and also to establish our Kurdistan operation for a long time. I can´t talk about production outlook because we don’t have any production yet. However, our expectation is to find reserves which will allows us to recover oil in enough quantity and in commercial terms.

So far has the drilling proved successful?

We have to wait until our drilling stage will be finished; today we have just spud our first well. It is our first drilling day in Kurdistan! We started just a few minutes ago! We have four or five months for achieving our targets and test the real oil capacity of the formations in our blocks.

As a foreign, European company, how do you find doing business in Iraqi Kurdistan?

It is a different way of doing business compared to other locations. People here are very well educated which is a great advantage. The contract conditions are transparent. We still need to get some definitions about the production stage but we believe that this is a place where we can do business without major problems.

What has been your experience with doing business with local companies?

It is a very sensitive question but most of the local companies have very well trained staff, local and international. They do business correctly, for example concerning Falcon Group and the Empire World, we have reached our agreements in a very short time and in a way which produce gratification for the 2 parties, the famous win-win formula, which is very favourable for both parties.

What do you think of the services of Falcon Group and Empire World?

Falcon Group has one of the best security companies in Iraq – Falcon Security, they are specialist, Falcon Security is very well trained and with good expertise, they know very well the region and their knowhow make the big difference. In others business like real state and housing, in construction or in the oil and gas services industry they are growing really fast keeping the quality and safety in very high standards. I can only speak on Repsol´s experience, but we have been quite comfortable working with Falcon Group and with Empire World. We have an excellent relationship with Mr. Peshraw Majid Agha. Personally I can settle it and as a local head of International Oil Company I can confirm the very good performance of the Falcon Group. They are always ready for helping us, and these actions have no price.

Do you think that this is probably the best office space that you can find in Erbil?

For the time being there is no better space here. These offices are really comfortable; and this is the cause for what most of the international oil companies are establishing their Erbil offices in this building. We were one of the first companies arriving to this building, we almost inaugurated it! Marathon and Repsol probably entered this building around the same time.

You have a wealth of experience in different emerging economies, how does it compare to the global standards?

The standards are good. The hardest thing is to find the right contractor but once you have one then you can work normally. In security and in office buildings for example we believe that Falcon Group and Empire World are doing a fantastic job, same level than other international companies. For that reason you can see that most of the international companies are working with them in Kurdistan.
You can see that our office design is a corporate one, similar to our headquarters in Madrid. We are not in Europe but we are getting the same service here, with quality, safety and efficiently.

How would you describe the oil and gas sector in terms of contractual agreements? It seems from my research that the production sharing agreements that the KRG are offering to the oil companies are very well structured….

I cannot speak about other companies because the production sharing agreements that we have signed are not similar to those signed for other companies. But in our case from the very first moment of the agreements negotiations we were pleased.

Do you feel that you are supported by the government?

We feel that the government is issuing the PSAs correctly, are helping the international companies’ trough advisors to find the precise way in country, so we are quite comfortable with MNR support.

Can it be compared to other parts of the world?

As I mentioned before MNR staff is very professional and well prepared for the oil business. The standards are very high.

Some people call it the last underdeveloped oil country…

It is still in development. It is a challenge for many companies, all of them working inside the exploratory frontiers of the Kurdistan Region. Finally the big companies are arriving to Kurdistan so it is a challenge for everyone.

How would you describe your strategy in Kurdistan?

Our strategy is first of all to fulfil our commitments during the exploration stage and then in case of success to start developing our discoveries. We believe that we are going to find oil and our strategy is to remain in Kurdistan for a long time. Repsol commitments with Kurdistan are in a base of a long term relationship, it’s not just a 7 year contract.

How do you contribute to the society?

ROMSA is doing many things for the society in the Kurdistan region especially in our licensed blocks. We are working from the beginning in the development of social responsibility projects. We have built facilities for the local residents where we are working. We have brought ophthalmology doctors to the area to test all the students in our blocks. More than 1000 people attended those sessions. We are now preparing in Spain the entire package medical glasses for everyone who needs it and we will delivered it for the villagers free of charge. We will distribute these medical glasses very soon. Also, we are building different facilities for the locals. We are building conference halls and ceremonial buildings, pipes for water distribution, water wells etc.

How do you approach employing locals and training them?

We work together, closely with the MNR. ROMSA have contracted a lot of our local staff through advertising in the local newspaper and then after holding job interviews together with the MNR, we got the definitions on the different positions to be cover. We were always counting with MNR advice and recommendations. Training in Repsol is a very important issue. All our local staffs have been trained during 2013 in international training centres and also have received in house courses covering many different specialities.

In the UAE, they often use the “Emiratization ratio”, do you have something similar in terms of a ratio of local to expat employees?

We have a ratio of around 40:60 approximately. We have 24 international staff and almost 30 locals. Some of the locals are covering managerial positions so they participate actively in ROMSA decisions in Kurdistan. Most of our locals are very well educated, graduated in local and international Universities; It is fair to mention that the universities in Kurdistan have excellent standards.

Our local staffs’ are covering position in different business areas, like in Finance, HEC, Social responsibility, Public Relations, Contract and Procurement, Controlling, etc.

How many blocks are you exploring?

Two blocks, Piramagrun which is developed close to Sulaymaniyah city, with an area of 901 km2 and Qala Dze, close to Ranhya City, with around 1852 km2.

Do you have any estimates of the reserves that these blocks might contain?

Yes but I can´t say what that figure is. It is confidential information. Of course we are going to announce that information when we discover it.

What is the quality of the crude oil here?

The quality of the crude oil here varies from place to place. Until 5 years ago, the average crude oil discovered was containing a lot of sulphurs and with an API degree which diverges from 17 to 20. But lately, the new discoveries are really encouraging and producing a different expectation for the oil industry because the quality of the oil is better, lighter oil with an API degree of around 35 to 40, which is most of the time beneficial in terms of production.

Can you tell us a bit about the size of your investment here?

Up to now, we have invested more than 150 USD million for the first exploration period and we are going to invest more in both blocks.

This also trickles down into the local economy…

Yes, most of the contracts are with local companies and also with international companies that are present in Kurdistan hiring local’s crews. For example in Well Services and in Seismic there are many international companies opening local branches in Erbil. We are always contracting companies that are under inscription in the MNR list of providers. I believe that the local people are really capable. The contracts are transparent and the number of companies working in the local market is increasing day by day. In the near future oil companies probably need more services, more quality, more efficiency and safety. There are too many oil companies arriving to Kurdistan, requesting the same services at the same time, so we will need more services companies in the future.

Could you tell us a bit about the largest project in Iraq that is being built just next door?

I cannot say because we are not working on that project. I think that Kurdistan is a place for growth. Most companies try to grow here. There is a lot of new business and enterprises. This is a new era in a place which I believe it is one of the last conventional oil and gas exploration areas in the world.

Once this crude oil is recovered from the ground do you have any part in the preliminary services?

There is a new pipeline which is being built; it is nearly finished in fact. We think that we are going to use this pipeline if we are finally discovering oil. Pipelines are going to be crucial for us and for the rest of the oil industry.