Although Chevron was a relatively late entrant into the Kurdistan Region, its roots in the area go back much further. Can you give us some background regarding the company’s work in Iraq?
Chevron has been actively engaged in Iraq for over 10 years. In 2003, Chevron worked with the Ministry of Oil to establish the Iraq Technical Assistance Program, which was subsequently replicated by about 35 other companies. This program established a process for engaging Iraqis, by training them and providing them with access to new technology. This also helped confront the challenges they encountered in field development. Subsequent programs followed. However, the great advantage with our initial effort was that we learned how to work with Iraqis and understand more of the working environment and culture. It also made us more aware of the lack of infrastructure in place. Hence, because of this early involvement, we were able to better understand the challenges of doing business in Iraq, both from a technical and non-technical perspective.

The operating environment must have been uniquely challenging. What was the oil and gas industry like during this time?
Our early focus was on the huge fields in the South, which were already discovered. Chevron prides itself on its considerable project management experience, and understanding of how to develop such fields. In 2007, Baghdad initiated a short-term Technical Service Agreement (TSA) program, and Chevron was part of a small group of companies that was invited to help the Government of Iraq (GOI) in specific fields for a short period of time. However, the landscape changed and a formal bid round was introduced instead.

Investment decisions, particularly regarding entry into a new country such as Iraq, are based upon careful technical and commercial evaluations and Chevron decided not to proceed as the bid rounds did not meet our investment criteria. New opportunities must offer competitive returns relative to both the perceived risks and the other investment alternatives in the company’s global portfolio.

This was naturally disappointing for us, especially as we had been working on these opportunities for a long time. However, Chevron continues to share a positive relationship with the GOI.

How then did the company become such an active player in the Kurdistan Region?
Chevron believes it can bring the most value to early exploration and development opportunities, and is committed to building a focused portfolio of key exploration prospects worldwide. Kurdistan, with its attractive fiscal terms and upside hydrocarbon resource potential, fits well in Chevron’s portfolio.

In 2006, when we were in the early stages of our discussions with Baghdad, we also set up an exploration group looking specifically at the Kurdistan Region. Chevron has an industry leading record in exploration success and has been ranked number one over the last 10 years in terms of overall exploration success. Thus, the Kurdistan Region, as an exploration opportunity, was always ideal. However, other factors were also considered.

Chevron is a world leader in heavy oil and we are recognized for our capabilities regarding sour gas (Hydrogen Sulfide (H2S)). When you think exploration, heavy oil, and sour gas, you think Kurdistan. So, even though our initial focus was on the south, we were preparing ourselves for the north as well. When the opportunity presented itself to get involved in the Kurdistan Region, we jumped. So, in the fourth quarter of 2011, we moved north. Within a relatively short period of time, we were able to acquire our interests in the Rovi and Sarta blocks; in June 213, we announced acquisition of the Qara Dagh block. Chevron continues to look to build its portfolio in Kurdistan. In addition, within one year of being awarded the PSC for Sarta and Rovi, we started drilling; this represents, by a long way, the fastest entry into the industry in the Region so far.

In terms of exploration, how do the topography and geology in the Kurdistan Region compare to other areas where the company is active?
One explanation for the rapid pace with which we have expanded our operations here in the Kurdistan Region is that we have a good idea of what to expect from our blocks due to the wide range of our international operations. We use analogues to examine where we are working in the world and where other companies have been active, and then use those references to gain a thorough understanding of what would be most similar to the Kurdistan Region. What we have seen thus far are large carbonate reservoirs. We are very familiar with these types of reservoirs from the work that we’ve been involved in in the neutral zone between Kuwait and Saudi Arabia, which we operate on behalf of the Saudi government. As I said before, there is an understanding that H2S will be present. We are quite familiar with that, particularly in our huge Tengiz Field in Kazakhstan. In fact, our ability to handle complex H2S opportunities was instrumental in the Chinese government requesting that we operate their Chuandongbei gas field, which is a very sour field. In short, the opportunities here are quite similar to others in Chevron’s portfolio.

Chevron believes it can bring the most value to early exploration and development opportunities, and is committed to building a focused portfolio of key exploration prospects worldwide. Kurdistan, with its attractive fiscal terms and upside hydrocarbon resources potential, fits well in Chevron’s portfolio.

What is Chevron’s outlook for the Region in terms of the oil and gas sector?
It is our firm belief that, in terms of the oil and gas industry, there are going to be numerous opportunities in the Kurdistan Region for a very long time, and we hope to be here for the duration. There are at least 50+ years of work for the oil industry here, and I expect that number to increase. It then becomes important to think long term, and that is exactly what the KRG is doing. It is implementing strategic plans to facilitate development across a wide variety of economic sectors. If you look at other cities around the globe that have exploded in terms of development, there aren’t always such plans in place. The agricultural, water, and mineral assets present here further indicate that Kurdistan is truly blessed. So, it has all the right ingredients to be successful. Moreover, with improving relations with the outside world coupled with the strength of the KRG, the Region has the potential to become a regional broker and a major source of stability in an uncertain world.