Petrel Resources' share price rises 134% on Iraqi contract

Listed Irish explorer Petrel Resources saw its price increase by 134 per cent in London yesterday after it announced that it had won a breakthrough contract in Iraq.

The John Teeling-chaired Petrel announced that the troubled country's oil ministry has awarded it an oil field development service contract for the Subba and Luhais field in southern Iraq.

The field already has proven reserves, and the Iraqi government has hired Petrel to develop production there to 200,000 barrels of oil daily from 50,000.

Subba and Luhais also has the capacity to produce 100 million cubic feet of gas. The contract is valued at close to €160 million, according to Petrel managing director, David Horgan.

Investors reacted by rushing to buy Petrel shares, which surged 134.3 per cent on London's Alternative Investment Market (Aim) to 85.5 pence (€1.26) yesterday afternoon, valuing the company at around €77 million, after hitting a high of 99 pence earlier.

Mr Horgan said he hoped the deal will lead to exploration opportunities, which could potentially deliver a greater pay off than the development contract.

"We're hoping that in the course of the contract period, those that are there on the ground should be on the inside track from the point of view of building an independent oil company in Iraq," he said.

However, the current government is working on developing a legal framework for exploring and developing what is recognised as some of the world's richest petroleum resources.

The country may have as much as 300 billion barrels in reserves.

It is not clear if this will allow western companies to explore for oil. Some other Middle Eastern countries do not allow exploration, but they do allow development and service.

Subba and Luhais was the third development and service contract bid that Petrel made in Iraq.

The others were Khurmala in the Kurdish-dominated north of the country, and Hamrin, 200 km north of Baghdad. However, these bids were not successful.

Petral carried out a study of the east Safawi block close to the Iraq-Jordan border, and is seeking to strike a production sharing arrangement with the Jordanians.

It is also testing for oil in between the Tigris and Euphrates, the country's most hazardous region.