Producer Genel Energy said it will book an impairment of $181 million for its Taq Taq oil field in Iraq after an independent report showed a sharp drop in reserves than previously expected.
Genel said Taq Taq is now estimated to have 59.1 million barrels of 2P reserves, down from 171.8 million following a review of the competent persons report by McDaniel and Associates.
Production at the Taq Taq field has fallen to nearly 19,000 barrels of oil per day (bpd), compared to 36,000 bpd at the end of 2016.
McDaniel’s report said there is still significant uncertainty in Taq Taq oil reserves, which are “dependent on the Shiranish formation fracture porosity in the un-swept portion of the reservoir, which remains very difficult to estimate,” it said.
As a result of the reserve downgrade, Genel said it expects to record an impairment, subject to audit, of $181 million to the Taq Taq field carrying value in its 2016 accounts.
The further reduction in reserve estimates for Taq Taq is a consequence of a reassessment of the gross rock volume above the oil water contact and fracture porosity in the undrained Cretaceous Shiranish reservoir, Genel said.
This follows an analysis of reservoir surveillance data and well performance in 2016 and the first two months of 2017.
Cumulative oil production from the Taq Taq field to 28 February 2017 is 207.9 million barrels. Of this figure, 1.8 million barrels has been produced in 2017.
Recently, key producing wells have exhibited high rates of decline as a result of water breakthrough, exacerbating the decline rate across the field.
Given the ongoing uncertainties highlighted above, the previous guidance for 2017 Taq Taq gross average production of 24-31,000 bpd is now removed, Genel said.
It said field production at Taq Taq will now be announced on a monthly basis going forward.