AFP:

Canadian oil exploration firm Heritage Oil on Wednesday announced a major oil discovery in the Kurdistan region of northern Iraq, estimated to contain up to 4.2 billion barrels.

The Miran West field holds between 2.3 to 4.2 billion barrels of oil, the company said in a statement, but the "highly fractured nature" of the reservoir means only 50 to 70 percent of it is recoverable.

Even so, Heritage Oil president Tony Buckingham said the discovery marks a "significant development milestone" for the company.

The Miran West field together with the neighboring Miran East field, covering 330 square kilometers (127 square miles), have the potential to deliver "significant value," he said.

Trucking of crude oil production from Miran West is expected to start by year-end, with each oil well built capable of producing from 10,000 to 15,000 barrels per day, Heritage said.

"This is excellent news and we look forward to the Miran field exporting oil later this year," said Ashti Hawrami, the Kurdistan regional government’s minister of natural resources.

"This will mean that the Miran field in the Kurdistan Region of Iraq will make a further contribution to Iraq’s oil revenue to be shared by all peoples of Iraq," he said.

My comment: This is significant in that several of the companies I bought last year have significant land positions right next to the Heritage properties. Niko Resources is partnered with Vast Exploration with Niko being the operator on one block. Western Zagros is another company that I hold and that had a nice jump yesterday. They also have a block that is relatively close to this find. For my money I like the Niko/Vast deal the best. Niko, as regular readers know, has had outstanding success offshore India and should end up cash flowing around $400 million a year that they can invest in exploration in high impact plays like this one in Kurdistan. I like the Vast Exploration management as they are the same management that ran Desert Sun Mining which was the 2007 Stock of the Year which was bought by Yamana Mining and made me about 400% on my money. There is risk here as the Iraqi central government does not recognize these oil contracts in Kurdistan. In the end I think some type of deal will be cut or the Kurds will just ignore the Arabs in Baghdad and continue to do what they are doing. The other risk is of course exploration risk but this area is very prolific as the Heritage results show and the area is so under explored that it is worth it. I trust the Niko management and I do not think they would have gotten involved unless they had a good handle on things and I am confident they performed a proper due diligence. I don’t want to hype things too much but this really has the potential, if things go right, to be a situation that could lead to early retirement for many shareholders. We are talking oil finds in the billions of barrels with extremely prolific wells and high net backs. The upshot is oil appears to have broken out and is moving higher. High risk and high reward do your own due diligence.

John Polomny
The Real Deal