Canada-based ShaMaran Petroleum has agreed to acquire a stake of 18% in the Sarsang licence in the Kurdistan region of Iraq from TotalEnergies.

Under the deal, ShaMaran will purchase a 100% stake in TotalEnergies subsidiary TEPKRI Sarsang, which holds production sharing contract (PSC) interest in Sarsang block.

HKN Energy owns 62% PSC interest in the 420km² Sarsang block while TotalEnergies subsidiary TEPKRI Sarsang holds 18% PSC interest. The Kurdistan Regional Government of Iraq (KRG) owns the remaining stake.

The deal has an initial consideration of $115m and a working capital adjustment of $14.2m.

At a later date, ShaMaran will also make a contingent payment of $15m depending on oil prices and production volumes.

The acquisition is part of the firm’s efforts to diversify its existing production base.

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By GlobalData

ShaMaran expects the Sarsang licence to add around 5,000 barrels per day of light crude oil.

Once the processing facility expansion is completed at the Swara Tika field in the Sarsang licence, ShaMaran’s Q2 2021 average net production of around 11,090bpd is expected to double in the second half of the same year.

In connection with this new facility, the Sarsang block is planned to be connected to the Atrush feeder pipeline to allow for future pipeline export.

ShaMaran president and CEO Adel Chaouch said: “This is a strategic transaction for ShaMaran delivering value to equity and debt holders and strengthening the financial profile of the Company.

“Upon completion, this acquisition will add immediate material production and cash flow to ShaMaran and will provide significant value enhancement. It demonstrates our continued commitment to Kurdistan and diversifies our existing production base.

“As a neighbouring field to the Atrush field, becoming a partner in the Sarsang field presents opportunities for potential integration synergies with Atrush operations.”

Located on the northern border of the ShaMaran’s Atrush block, the Sarsang block comprises two producing fields, Swara Tika and East Swara Tika.