Shares in Geo-Jade Petroleum surged as much as 9.3 percent today after the Chinese oil and gas developer said it will lead a USD1.2 billion joint investment with Iraqi partner HILAL Al Basra to develop, build and operate a major oil and gas project in Iraq in return for a cut of future oil revenues.
Geo-Jade Petroleum’s share price [SHA:600759] closed up 4.6 percent at CNY2.23 (USD0.33). Earlier in the day it hit CNY2.33.
A consortium co-founded by Geo-Jade and HILAL Al Basra has signed a 30-year agreement with state-owned Basra Oil to develop the South Basra Integrated Project, with an option to extend for a further five years, Geo-Jade said on May 23.
The consortium is required to boost output from the Tuba oilfield to more than 100,000 barrels a day and to maintain that level for the next 17 years, the Beijing-based firm said. It should also build a refinery and petrochemical plant and construct supporting infrastructure such a thermal power plant and a solar power station.
Geo-Jade will hold a 67 percent stake in the consortium and will make a proportionate investment of USD848 million. It will be fully responsible for the development, upgrading, construction, commissioning and operation of the South Basra Integrated Project. Basra-based HILAL Al Basra will hold the rest of the shares and will invest the balance of USD352 million.
Basra Oil will provide the land and security for the project for free, Geo-Jade said. The government-run company has also promised to supply the oil and gas used by the refinery and petrochemical factory at a discounted price once they start operations.
The consortium will begin recouping its investment once it fulfils the minimum required investment in the project and boosts the Tuba oilfield's daily output by 25 percent to 31,000 barrels. From that point, it will be paid a fixed fee per barrel of oil produced.
Once the Tuba oilfield starts generating revenue through crude oil sales, the consortium has the right to use its post-tax sales income to build and operate a refinery and petrochemical plant with a daily capacity of 200,000 barrels.
It is not clear if the consortium led by Geo-Jade will also get a cut of the profits. According to Iraqi law, all oil and gas resources remain the property of the Iraqi government. Developers should realize a return on their investments according to the agreed terms.
Geo-Jade owns and runs two oil and gas projects in Kazakhstan. Last year they produced 684,700 tons of crude oil. The company’s overseas revenue amounted to CNY2.5 billion (USD348 million) that year, amounting to 99.9 percent of its total revenue, according to its 2024 annual report.
