Annual Report 2009

Transcription

Annual Report 2009

Kuwait Foreign Petroleum Exploration Company K.S.C
H.H. Sheikh Sabah Al-Ahmad
Al-Jaber Al-Sabah
Amir of the State of Kuwait
H.H. Sheikh Nawaf Al-Ahmad
Al-Jaber Al-Sabah
Crown Prince
www.kufpec.com
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Fostering
Technology Transfer
Board Of Directors
In light of the ever changing corporate environment and the intensifying global competition, KUFPEC
will focus on the objectives set for us
by our stakeholder KPC, namely
contributing to the national economy,
bridging the knowledge gap, developing local expertise and furthering the
transfer of technology.
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Accordingly, our effort will be directed
towards utilizing available human
and financial resources in order to
further enhance our corporate value
and our position in the international
upstream oil and gas sector.
From left to right
Mr. Abdullah Baroun
Mr. Musaad Al-Saeed
Mr. Mohammed Abdulwahab
Mr. Mohammed Al-Hasawi
Mr. Fahed Al-Ajmi
Mr. Mazen Al-Sardi
Mr. Abdullah Al-Roumi
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About Us
Management
Mission
To increase the value of the Company to the State
of Kuwait by profitably exploring for and producing
hydrocarbons internationally.
Objectives
• To achieve a production target of 80,000 boepd
by year 2010 supported by a reserves base of 380
mmboe.
Mr. Fahed Al-Ajmi
• To achieve a 10% average profit growth and a
Chairman and Managing Director
long-term average of 10% return on average
capital employed over 10 years.
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• To create an organization that is effective and
efficient.
• To access technology and transfer knowledge to
relevant KPC subsidiaries in Kuwait.
Vision
To become one of the major contributors to the
income of the State of Kuwait, A realisable target
for the company, within the foreseeable future, is
to achieve net production of 80,000 boepd by year
2010 while maintaining an average long-term rate
of return greater than that offered by KPC’s other
investment opportunities.
Mr. Khaled A. Al-Qauod
Deputy Managing Director
Finance & Administration Affairs
Mr. Abdulnaser Al-Fulaij
New Business Development
From Left to Right
Mr.Mezyad Z. Al-Mutairi
Mr. Abdulla N. Malek
Mr. AbdulRahman R. Al- Bedaiwi
Ms. Ghada Y. Al-Amer
Manager, Human Resources
Manager, Government &
Public Relations
Mr. Ahmed A. Al-Awadhi
Manager, Management Support
Mr. Ali Al-Shammari
Chief Oprations Officer
Mr. Tareq M. A. Ebrahim
Manager, Far East Asia &
Australia Region
Mr. Humoud A. Al-Baloul
Manager, Commercial
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Manager, Finance
Manager, Planning & Support
Mr. Gavin Daniel
Manager, Legal Affairs
Mr. Royal MacBeath
Manager, Africa Region
Mr. Graham J. Whitehead
Manager, South East Asia
Mr. Kourosh Amiri-Garroussi
Manager, Middle East Region
Message from the Chairman
and Managing Director
As Chairman and Managing Director, it gives me
immense pleasure, on behalf of my fellow board
members and on my own behalf, to present the
28th annual report on the business and operations of Kuwait Foreign Petroleum Exploration
Company (KUFPEC), together with the annual
accounts for the fiscal year ending 31st December
2009. In many ways, 2009 had been another very
active and successful year, highlighted by landmark
achievements.
Despite the unprecedented challenging global
business climate that continued to place tremendous pressure on the industry during 2009, we
continued to pursue our strategy of growth. Great
progress has been made in strengthening KUFPEC’s
positioning for unprecedented level of activity in
2010 and beyond. Through acquisition opportunities that had been reviewed, it is apparent that the
industry views KUFPEC as a worthy and reliable
partner.
Among the positive and promising developments
during 2009, KUFPEC and Joint Venture partner
Apache joined Chevron to commence front-end
engineering design study to consider development
of the Wheatstone liquefied natural gas (LNG) hub
in Western Australia. In this project, Apache and
KUFPEC will provide gas from their Julimar and
Brunello fields, located in northwestern Australia,
to supply 25% of the inlet gas to Trains 1 and 2 and
become foundation equity partners with Chevron
in the Wheatstone LNG Project facilities. Earlier
in 2009, the Australian government confirmed
the award of the WA-427-P offshore block to the
KUFPEC (35%) - Apache (65%) joint venture.
In Vietnam, two new ventures (Blocks 19 and 20)
were awarded to Kufpec as part of a consortium.
Kuwait had already had other interests in Vietnam
through KUFPEC’s sister company Kuwait Petroleum International (KPI) and parent company
Kuwait Petroleum Corporation (KPC).
In Indonesia, the Pangkah new LPG Production
Facility was officially inaugurated. In Egypt, the
Assad and Zaraf discoveries in North Bardawil
field were brought on-stream in August 2009 with
an average gross production rate of 16,991 boepd.
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Average production rate for the year 2009 was
60,035 boepd, an increase of (7.7%) over the previous year’s production of 55,764 boepd, while current hydrocarbon reserves stand at approximately
221.5 mmboe and continued to be heavily weighted
toward gas which accounts for 78% of total reserves
with the remaining 22% for oil.
KUFPEC ended the 2009 year with a significant net
cash position. Our 2009 total operating revenues
amounted to US$ 820.9 million, of which oil and
condensate represented 47.7% of total revenues,
while gas accounted for 52.3%. KUFPEC’s
2009 after tax net profit of US$ 108.3 million was
approximately 2.6 times above the budget primarily
as a result of actual prices being higher than budget
in addition to lower production costs and lower
interest expenses.
KUFPEC intends to keep pace with the rapidly
intensifying global competition for markets and
technology and the associated restructuring process of the different world industries. As an energy
company with long-term commitment towards our
stake holder (KPC), the government of Kuwait as
well as the national oil industry, Kufpec plans to accelerate the pace of know-how acquisition. This will
further KUFPEC’s role as a catalyst in the building of the technological capacity of the national oil
companies, particularly in respect of gas and heavy
oil operations.
Accordingly, our effort will be directed towards
utilizing available human and financial resources
by becoming an operator.
As the company grows, we continue to enhance our
core values of social responsibility, fairness, trust and
corporate citizenship. Our commitment to community programs and partnerships during 2009 was
clearly manifested through donation, sponsorship
and support activities. During the year, KUFPEC
participated in several sponsorships such as the Silver
Sponsorship of SPE’s NATC in Cairo, Al- Takaful
Society for Prisoners Care in Kuwait which is considered as one of the associations of public benefit
charity and the Petroleum Golf Day at the Sahara
Club. In addition, KUFPEC and its joint venture
partners in Sudan contributed to several socio-economic development programs that comprised the
building of two primary schools, one women activity center and one rehabilitation center, and a US$
500 thousand physics lab project for the University
of Juba in southern Sudan.
Unquestionably, we have a lot more to do ahead.
KUFPEC’s ability to compete internationally rest
upon its strategy of sustainable growth and its personnel. During 2009, KUFPEC continued to place
emphasis on providing the best training and career
development opportunities for its employees. An
extremely comprehensive and practical 6 month upstream training session was conducted. Part of the
training was high-tech training program designed by
Schlumberger and KUFPEC for 13 junior and newly
recruited national employees, at the state-of-the-art
Schlumberger’s Middle East and Asia training center in Abu Dhabi. The participants were comprised
of engineers and geologists.
KUFPEC’s employees have always been a pillar in all
our endeavors. The excellent results achieved during
the year can be attributed to the sterling efforts of
our employees across the organization. I, along with
my colleagues on the Board, would like to convey
our thanks and sincere appreciation for their commitment and enthusiasm.
I also thank my colleagues on the Board, whose guidance; counsel and support have been invaluable, especially at a time when the company has had to deal
with so many major challenges.
I would like to express our great appreciation to His
Excellency the Minister of Oil and the KPC Board
of Directors for their confidence, support, and unflinching belief in our ability to deliver value.
I would like to take this opportunity to reiterate our
commitment to work towards meeting their expectations on sustained basis. Guided by a clearly defined and balanced strategy of sustainable growth,
KUFPEC enters its 29th year of business with abundant opportunities for value growth and the capacity to deliver that growth.
On behalf of the Board of Directors and the executive management team, I also would like to express
our sincere appreciation and gratitude to His Highness the Amir Sheikh Sabah Al-Ahmad Al-Jaber
Al-Sabah, His Highness the Crown Prince Sheikh
Nawaf Al-Ahmad Al-Jaber Al-Sabah, and His Highness the Prime Minister Sheikh Nasser Al-Mohammed Al-Ahmed Al-Sabah. We wish them continued
success in leading our beloved country towards further prosperity and a better future.
Fahed S. Al-Ajmi
Chairman and Managing Director
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KUFPEC Areas of Operation
Financial & Operating
Highlights
Total Revenues (US $ MM)
Actual
Budget
820.9
833.7
Total Net Profits (US $ MM)
Actual
Budget
108.9
41.6
9
Daily Average Production (boepd)
Actual
60,035
Budget
79,800
Total Reserves (mmboe)
Actual
Budget
As our focus turns to 2010 and beyond, our balanced strategy of sustainable growth will remain relevant and
central to the evolutionary course of the company. Nevertheless, more emphasis will be given to re-adjust to
a new stage in the company’s life cycle whereby KUFPEC’s remit as a catalyst in the process of technology
transfer will be furthered through consolidating its role as a true upstream operator.
Countries of activity
KUFPEC is currently active in 15 countries, with operations grouped within four core areas
spanning 3 continents, managed by five Regional Offices.
South East Asia Region
Far East & Australia Region
Middle East Region
Africa Region
Indonesia-Malaysia- Vietnam
221.5
88
380
Pakistan-Yemen-Syria
Australia-China-Philippines
Egypt-Sudan-Tunisia-Ivory Coast-Mauritania-Congo
Director’s Report
on Activities
WOMAN ON SHIP - BORNEO - INDONESIA
OSEIL 4, RIG, FIELD FACILITY - Indonesia
During 2009 in South East Asia, KUFPEC and
partners made a significant commercial oil and gas
discovery in Malaysia (Sub Block 7T-11 in SB 302),
were awarded two new exploration production sharing contracts (PSCs) in Vietnam (Blocks 19 & 20),
successfully delineated oil discoveries in Malaysia
(PM 304) and commenced building offshore facilities to develop a new gas field in Indonesia (Gajah
Baru gas field in NSBA). Meanwhile at the Pangkah
field in Indonesia, development drilling of the eastern half of the field was completed, the LPG facilities were commissioned and fabrication of 3 new offshore platforms commenced.
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INDONESIA
BUTON PSC (KUFPEC: 30%)
The Buton PSC covers an area that extends both
onshore and offshore Buton Island, southeast of Sulawesi. The block was awarded in 2007. In 2007/8
an airborne gravity magnetic survey was acquired
followed by a 318km 2D seismic survey that was
completed in 2009 and has identified prospects and
leads.
SERAM NON-BULA PSC (KUFPEC: 30%)
The Seram PSC is located at the eastern end of Seram Island near West Papua where oil is produced
from the Oseil and Nief Utara fields. KUFPEC’s net
share of oil production in 2009 was 676 bopd. During 2009, 293km of 2D seismic surveys were completed over 4 prospective areas and the 3rd and final
relinquishment program was submitted for government approval. One well was drilled in the Oseil
field but this failed to be productive. A development
and exploration drilling program will resume during 2010.
PANGKAH PSC (KUFPEC: 25%)
The Pangkah PSC is located offshore eastern Java
and contains the Ujung Pangkah oil, gas and condensate field. During 2009 development drilling
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from wellhead platform A (WHP-A) was completed.
Fabrication of WHP-B was completed and installation had commenced at year end. In March 2009
the LPG production facility was commissioned enabling Butane and Propane production to begin in
April. KUFPEC’s share of production during 2009
was 943 bpd oil and condensate, 13.276 mmscfd gas
and 167 bpd LPG.
mmscfd gas. During 2009, contracts were awarded
to develop the Gajah Baru (GB) field. Fabrication of
the GB wellhead platform commenced. Installation
and development drilling is scheduled for second half
2010. Fabrication of the GB central processing platform commenced with production start-up expected
late 2011.
Development drilling from WHP-B is expected to
commence mid 2010 and fabrication of the offshore
compression, processing and accommodation platforms will continue for installation during 2011.
MALAYSIA
NATUNA SEA BLOCK A
(KUFPEC: 33.33%)
This PSC is located in the Natuna Sea and currently
supplies gas to Singapore from the Anoa field. KUFPEC’s share of oil and gas production increased
in 2009 to 377 bpd oil and condensate and 33.593
SB-301 PSC (KUFPEC: 40%)
The PSC is located offshore Sabah. The Sapulut-1
commitment exploration well was plugged and abandoned in 2009 as a dry hole and the PSC has been
relinquished.
SB-312 PSC (KUFPEC: 40%)
This PSC is located offshore Sabah. In April 2009 a
705 km 3D marine seismic survey was completed then
merged with 2004 data. At end of 2009 a semi submersible drilling rig was on location preparing
to spud the first of three commitment exploration wells.
The Middle East Region
SB-302 (Sub Block 7T-11)
DEVELOPMENT AREA (KUFPEC: 40%)
PUTRAJAYA LAKE - Malaisia
The PSC is located offshore Sabah. During Q1 2009
the Belud East – 1 well discovered oil and gas in a
structure 9 kilometers northeast of the 2004 Belud
South - 1 discovery. A declaration of commercial
discovery was accepted by the government and options for development of the two discoveries are being assessed.
EAST-SHABWA - YEMEN
PM-304 (KUFPEC: 25%)
The PSC is located offshore east of the Malaysian
peninsular and includes the Cendor oil field. Higher rates of oil production were achieved in 2009 and
KUFPEC’s net share rose to 2,630 bopd. The field
has surpassed expectations and a Phase-II development scheme is being prepared for approval during
2010. During 2009 three appraisal wells successfully
delineated the Irama and Desaru oil discoveries to
the west of Cendor.
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VIETNAM
BLOCK 19 & 20 PSCs (KUFPEC: 40%)
In 2009 KUFPEC and partners were awarded two
PSCs offshore Vietnam in the South China Sea covering an area of 9,200 sq km. The initial 3 year work
program requires seismic and drilling. The seismic
commitment was fulfilled in 2009.
The Middle East Region witnessed significant operational progress during 2009.The Region’s total net production increased by 10% in 2009 as compared to 2008.
In the Kadanwari field (Pakistan), K19 & K14ST
wells were successfully drilled and commissioned
with 31 & 11 mmscfpd gas production respectively, adding 26.5 bcf additional reserves. Processing
of Latif Gas (an adjacent new discovery) through
Kadanwari facilities has increased revenue for the
Kadanwari JV. Zamzama 6, 7 & North-1 wells were
successfully commissioned, resulting in 9% increased
net daily production.
The Temporary Processing Unit (TPU) in East
Shabwa Block-10 (Yemen) was completed in the
record time of 10 months, and allowed the processing of additional 15,000 bopd (gross) from the
basement. After the successful drilling campaign
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(12 wells) in Jannah Block-5 (Yemen), oil production increased by 17% (net KUFPEC) as compared
to 2008.
PAKISTAN
Bhit & Badhra fields (KUFPEC: 6%)
During the course of 2009, average daily production was
56,072 boepd (KUFPEC net of 3,372 boepd). KUFPEC’s net share of cumulative gas & petroleum liquids
production increased 8% compared to 2008. Two development wells in Bhit, well 11 & 12, were successfully
drilled, tested and tied-in with the facilities. Commissioning of Phase III of the Bhit Plant was successfully
completed to handle an additional 30 mmscfpd. The
Bhit compression project, initiated in late 2007, successfully progressed according to schedule throughout
2008/9. The first sets of compressors were functional in
March 2009, while the full system will be operational by
15 Dec 2010.
Bado Jabal-1 exploration well in the Badhra Area “A”
License, was drilled to test the deeper targets of Lower Goru & Chiltan but failed to prove the presence
of hydrocarbons. Bado Jabal-1 was eventually sidetracked to drill the approved Badhra-5 development
well location. An additional pay zone was discovered
and tested 12 mmscfpd from Mughalkot A sand.
YOUNG MAN - YEMEN
Kadanwari (KUFPEC: 15.789%)
Jannah - Yemen
Production from the Kadanwari gas field averaged
7,483 boepd (KUFPEC net 1,186 boepd) during 2009. The development wells, K-19, K-14ST
& K-20 were successfully drilled and tested. These
wells added additional reserves in the eastern and
western parts of the field. The joint venture partners
finalized the Extended Well Testing Agreement
to process 25 mmscfpd of gas from the Latif field,
a new discovery in an adjacent block operated by
PMV, through the Kadanwari plant. This will result
in an increase of revenue for the Kadanwari joint
venture. The Latif well tie-in was completed and gas
processing commenced in January 2009.
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Qadirpur Field (KUFPEC: 13.25%)
Gas production from the Qadirpur field averaged
86,245 boepd (KUFPEC net 11,365 boepd) during
2009. KUFPEC’s net share of cumulative gas and
petroleum liquids production during the year was
up by 1% from the previous year.
A Well Head Compression (WHC) project was
initiated in 2008 to maintain plateau production
up to 2017. Due to delays in the Compression project, additional development wells were successfully
drilled to sustain production. The WHC project
completion is expected by 31 Aug 2010. A capacity
enhancement project was initiated to upgrade the
plant and increase the supply of processed gas from
500 to 600 mmscfpd. A Permeate Gas Sales Agreement was signed in September 2008 that allows the
joint venture partners to sell low quality value gas
up to 75 mmscfpd that was previously flared. The
arrangement was completed in 2009 to supply Permeate gas to Engro.
The northern part of the field is under the Indus
River flood plains, therefore a study was completed
to design an artificial island to facilitate the drilling
of five extended-reach wells.
Qadirpur Deep-1 exploration well tested fair quality gas from the Sember sand, currently completed
& producing from the Sui Main Limestone.
Zamzama Field (KUFPEC: 9.375%)
Gas production from Zamzama averaged 70,117
boepd during 2009 (KUFPEC net 6,583 boepd).
KUFPEC’s net share of cumulative gas and petroleum liquid products from this field in 2009 was 9%
higher than in 2008. The budgeted production forecast for 2010 is 6,750 boepd. Two development wells
were drilled & tied-in during 2009, which increased
production by 230 mmscfpd in March 2009. Phase II
project is completed for the processing of HCV gas. A
FEED study was initiated during 2009 and first production is expected by the first quarter of 2011.
Dadhar Block 2867-3 (KUFPEC: 21.67%)
Tangna Pusht-1 exploration well was drilled then
plugged and abandoned as a dry hole in the first quarter of 2009. The joint venture partners unanimously
agreed to relinquish the permit.
Zarghun South (KUFPEC: 3.75%)
Gas delivery is currently pending on the execution of
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a Gas Purchase Agreement (GPA) by the Directorate
General (Gas). The joint venture partners requested
to extend the first gas to 30 June, 2010. Bid evaluation
for field development was completed and the location
of the ZS-3 well was finalized.
YEMEN
East Shabwa Block-10 (KUFPEC: 14.2857%)
Oil production from East Shabwa for 2009 averaged
50,932 bopd (KUFPEC net 4,188 bopd). KUFPEC’s
net share of production in 2009 was 52% higher than
in 2008
A number of projects were finalized to upgrade the
facilities in order to increase and optimize future production including the Temporary Processing Unit
(TPU) that was completed in a record time of 10
months. The TPU is handling 15,000 bopd additional
basement production. The current gross average daily
production is over 60,000 bopd. The development
plan saw the active drilling of 21 wells using three rigs.
Drilling efforts were mainly focused on the development of the Kharir basement reservoir in which 8
Basement oil producers, 12 Basement water injectors
and 1 Kharir Biyad water source wells were drilled.
In 2010, 17 more wells are scheduled for drilling to
increase production to 60,800 bopd gross.
PALMERA - SYRIA
Jannah Block 5 (KUFPEC: 20%)
Oil production from the Jannah Block averaged
42,117 bopd (KUFPEC net 2,882) during 2009.
KUFPEC’s net share of daily average production
for the year was 17% higher than in 2008. Scheduled for 2009 were major development drilling
plans that include: 10 development wells, two vertical oil producer in Al-Nasr field; two horizontal &
one vertical wells in Dhahab field; three vertical &
one basement well in Halewah field; and one well
in Aser field. The well workovers were aimed to
increase production during 2009. 12 wells including two Basement wells are planned to be drilled in
2010 to sustain the production of 43,400 bopd.
Atwoods Eagle Deepwater Rig on Heavy Lift Vessel - Australia
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Al Barqa Block 7 (KUFPEC: 20.25%)
This onshore exploration permit covers 4,939 sq
km and was ratified by the Yemeni Parliament on
the 8th of March 2008 for an initial 3-year exploration period. 276 km 3D seismic acquisition and
processing resulted in the selection of two basement
prospects to be drilled. Two exploratory wells are
planned for 2009. The Al-Meashar-1 exploration
well was drilling at year end.
Quzah Block 74 (KUFPEC: 21.25%)
Mukalla Block 15 (KUFPEC: 45%)
The Far East and Australia Region has continued
to provide value to KUFPEC’s bottom line. The
highlights of the Region’s include: successes in WA356-P by adding to the resources in the Julimar and
Brunello discoveries, and the signing of key agreements with the Chevron Corporation to evaluate
the commercialization of the WA-356-P within the
Wheatstone LNG project. In China, a new gas sales
contract for the Yacheng Field was signed in January 2009. This will provide increased gas sales to the
main gas buyer.
Block 74 was provisionally awarded in July 2005.
The onshore exploration permit covers an area of
1,309 sq km. The block was ratified by the Yemeni
parliament on 8 March, 2008. Geological and geophysical activities to acquire 2D seismic and upgrade
leads to prospects continued in 2009.
The production sharing agreement expired on 19
December, 2008. However the co-venturers who
applied for a 3-year extension from the Yemeni
Government are still awaiting the approval.
SYRIA
Syria Block 17 (KUFPEC: 33.33%)
The Al Tayr-1 exploration well spudded during the
fourth quarter of 2009 and drilling operations continued at year end.
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The overall net production of the region in 2009
was 12,584 boepd, which is about the same as 2008
(12,627 boepd). This difference is mainly attributed
to the delay, until early Q3 2009, in recovering full
hydrocarbon production from the Harriet Joint
Venture following the Varanus Island hub explosion
in June 2008, and the major shut down in the Mutineer-Exeter fields as a result of electrical damage to
key equipment. Down-hole pump problems in the
Mutineer-Exeter fields also limited production.
AUSTRALIA
Harriet Joint Venture (KUFPEC: 19.28%)
Net production in the Harriet Joint Venture averaged 3,479 boepd for 2009. Production was back up
to full capacity in third quarter 2009 after being halted in June 2008 following the Varanus Island hub
explosion. Production increased from 2,235 boepd
in 2008 as a result of the drilling and completion of
the successful Linda North-1 well and repairs carried
out early in 2009 to re-establish production at the
Varanus Island hub.
Mutineer-Exeter Field (KUFPEC: 33.4%)
SYDNY BRIDGE - AUSTRALIA
During 2009, net production in the MutineerExeter Field declined to 2,736 bopd from 3,389
bopd in 2008. A serious electrical failure caused
the Floating Production Storage and Offloading
(FPSO) facilities to be offline for about six weeks
while being repaired. Problems with down-hole
electrical pump failures also caused the loss of production in the Exeter-8, Mutineer-12 and Mutineer-15 wells.
WA-356-P (KUFPEC 35%)
Exploration and appraisal drilling continued in the
Julimar and Brunello areas. Successful wells drilled
in 2009 were Brokenwood-1, Brokenwood-2, Balnaves-1 and Balnaves-2. At year-end, the Balthazar-1 was drilled to delineate the oil discovery made
in the Balnaves wells.
A major accomplishment during 2009 was the signing of two agreements with Apache and Chevron to
initiate front-end engineering design (FEED) study
to consider development of the Wheatstone liquefied natural gas (LNG) hub in Western Australia.
The FEED study will evaluate the commerciality
of the gas reserves on WA-356-P and Chevron’s
Wheatstone Field in the near-by Permits. Eventually, KUFPEC would participate in several sectors
of the value chain, from well head in WA-356-P to
the export terminal onshore at Ashburton North
and would become a foundation partner with an
initial participating interest of 8.75% in the Wheatstone LNG Project. Final Investment Decision
(FID) will be made in 2011 on proceeding with
this project.
Mutineer FIELD - Australia
OTHERS (Australia)
Due to successful discovery of the Fletcher-3 well
KUFPEC and the JV’s are evaluating the commercial viability of this discovery.
KUFPEC applied for retention leases over WA-264
-P & WA-8L and is waiting for government approvals. KUFPEC continues to rationalize its portfolio
of Australian joint ventures. This operation will
allow the company to concentrate its effort and investments in those joint ventures which promise the
greatest rate of return.
VICP59 (KUFPEC 35%)
CHINA
WA-191-P (KUFPEC 33.4%)
In VICP59 in the Gippsland Basin a seismic reprocessing project is being undertaken. It is hoped that
the interpretation of this data will result in a prospect being firmed-up for drilling.
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19
Yacheng Field (KUFPEC: 14.7%)
A new gas contract was signed in January 2009 to
accelerate production from the Yacheng field to
the joint venture’s main buyer. A five-well drilling
program was started in late 2009 offset production
declines in the Yacheng field. Negotiations have
started to tie in gas discoveries in adjacent blocks to
the Yacheng Y-13 production facilities. Production
during 2009 was 6369 boepd net to KUFPEC.
The Yacheng Operating Company reached HSE
milestones in respect of Day Away from Work Cases
(DAFWC) and Lost Time Injuries (LTI). 5,000,000
man-hours without DAFWC and 6,000,000 manhours without LTI were recorded.
PHILIPPINES
SC-60 (KUFPEC: 30%)
The high potential, exploration well, Silangan-1,
which was originally scheduled to be drilled in 2009
has been delayed until the second quarter of 2010.
The well will test a structure at the depth of 1400
meters of water.
AFRICA REGION
NILE RIVER, ASWAN - EGYPT
Africa Region
During 2009 the Africa Region experienced both
exploration and development success. Firstly, the
North Bardawil Development was placed onstream in August 2009 at an initial gross production rate of about 98.5 mmscfpd (16,991 boepd)
enabling an average production rate for the Africa
Region during December 2009 of 4,368 boepd
net KUFPEC (as compared to an average production rate for the Africa Region during December
2008 of 3,062 boepd net KUFPEC). Secondly the
successful Prince-1X exploration well was drilled
within the Ras Kanayes Concession in an onshore
area with quick development potential. In addition a significant geophysical data acquisition survey was completed on KUFPEC’s operated North
Kairouan Concession in Tunisia that should result
in the proposal of a commitment exploration well
location in 2010
NK Permit & SLK Mining - Tunisia
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EGYPT
In Egypt, KUFEC participates in a number of projects that range from exploration to development to
production in the onshore Western Desert, the offshore Nile Delta, and the Gulf of Suez.
Western Desert, Onshore
West Sitra (KUFPEC: 25%)
Production continued from the Shell operated West
Sitra Development Lease during 2009 with a gross
average production rate of 562 boepd. Exploration
activities included the processing and interpretation
of the new 3D seismic data which was completed by
end-2009. The main objectives in 2010 are to enter
into the third exploration period (10 May 2010 - 9
May 2012) and drill one exploration well.
Ras Kanayes (KUFPC: 36.36%)
Production continued from the Ras Kanayes
Concession in the Western Desert (operated by
Apache) during 2009 with a gross average production rate of 350 boepd. The Prince-1X well was
successfully drilled and tested with a combined
total production rate in excess of 40 mmscfpd
natural gas and 1,600 barrels of condensate per
day (bcpd) from 2 different reservoirs. The joint
20
venture plans to drill 2 more wells during 2010 to
further explore and appraise this prospective area.
NILE DELTA, Offshore
North Bardawil (KUFPEC: 40%)
The operator IEOC completed the First Phase
Development by bringing the Assad and Zaraf discoveries on-stream during August 2009. The gross
average daily production from the discoveries for
2009 (September – December) was 98.5 mmscfpd
(16,991 boepd). The initial development of the area
being complete; no major activities for this field are
planned for 2010. Possible offsetting development
potential will be evaluated during 2010/2011.
Tinah (KUFPEC: 40%)
The concession is currently in the Second Exploration Period (8 June 2008 - 7 June 2010). The Second
Exploration Period has a work commitment to drill
two exploration wells. The first commitment well,
the Nardine-1 well, yielded a marginal natural gas discovery that requires additional assessment to confirm
or disconfirm potential commerciality. The second
commitment well, the Seridia-1 well, will be drilled
and evaluated March-April 2010. Concurrently, the
decision will be made whether to enter into the Third
(final) Exploration Period with an associated drilling
commitment of two wells.
West Mediterranean Block -1
(KUFPEC: 10%)
The joint venture’s efforts during 2009 focused on
evaluating and ranking the exploration prospect inventory. These efforts are ongoing but any related
drilling has been deferred into 2011/2012 pending
the joint venture completing its evaluation. The possibility of tying-in some of the existing discoveries in
cooperation with other joint ventures, as compared
to a stand-alone project, is being investigated.
Africa Region
GULF OF SUEZ, Offshore
Geisum & Tawila West (KUFPEC: 40%)
KASR OULED SOULTANE TATAOUINE - TUNISIA
The operating company PetroGulf Misr implemented development and exploration programs in
2009 to maintain the production and evaluate the
Block’s upside potentials. The gross oil production
from the Concession averaged 9,553 bopd during
2009. Four development wells were drilled and tied
into production, with workover activities ongoing
to overcome the production challenges including
the high natural decline rates of the producing reservoirs and controlling the produced water cut. An
Integrated Reservoir Study (reserves certification)
was continued along with other studies to enhance
the overall exploitation practice within the concession. The joint venture plans to drill additional
development wells during 2010, along with at least
one exploration well which will be the first drilled
by the joint venture.
Install Lasalle using PCS cable tool - TUNISIA
23
SUDAN
Block B (KUFPEC: 27.5%)
With an experience record of more than two
decades in Sudan, KUFPEC and its partners
focused their efforts during 2009 on finalizing the Block B consortium, accomplishing
the assignment of a 10% participating interest share to Nilepet (representing the South
Sudan interests), and settling the White Nile
compensation issue. Within this context, the
offer to Mubadala to join the Consortium
with 20% interest was revoked by the Sudanese Authorities due to delays in concluding
arrangements. These issues need to be resolved
before exploration operations can be initiated
on the Block B.
TUNISIA
KUFPEC has been operating in Tunisia for more
than two decades. The Sidi El-Kilani Field provides
a high quality 39 API crude oil.
22
North Kairouan (KUFPEC: 50%)
The North Kairouan Permit was granted to KUFPEC in 1984. Several renewals of the initial exploration period were granted by the authorities. The current exploration period is the First Extension of the
Fourth Renewal (11 July 2008 - 10 July 2010) which
includes an associated work commitment to acquire
seismic and drill one well. Around 450 kilometers of
2D seismic data were acquired during 2009 meeting
the seismic work commitment. The seismic data is
in the process of being processed and interpreted to
confirm the location of the commitment well, which
must be spudded prior end of the current extension
period in July 2010.
Sidi El Kilani (KUFPEC: 22.5%)
Cumulative production from the Sidi El-Kilani field
totaled over 47.8 million barrels of oil by end-2009.
The field continued to outperform expectations due
to a lower than estimated production decline rate.
Gross oil production averaged 1,118 bopd during
2009. An Integrated Field Study was completed in
2009 to define any possible remaining development
drilling locations. One development well is planned
for 2010.
IVORY COAST
Block CI 24 (KUFPEC: 33.75%),
Block CI 102 (KUFPEC: 27%)
Both blocks are exploration concessions. Block CI 24
is in its Third (final) Exploration Phase. The Virgo-1
well prospect will be drilled in Block CI 24 during
2010. If a discovery is not made, the Block will be relinquished. The First Exploration Phase for Block CI
102 expired on 10 December 2009. A one year extension to the initial First Exploration Phase was granted
by the government to allow the joint venture to final-
ize the evaluation of the Block’s exploration potential before making a decision on entering into the
Second Exploration Phase.
Africa Region
MAURITANIA
SAHARA MAN - MAURITANIA
Chinguetti EEA (KUFPEC: 10.23%),
PSC A (KUFPEC: 13.08%),
PSC B (KUFPEC: 11.63%),
NK Permit & SLK Mining - Tunisia
KUFPEC acquired Mauritania Holdings BV (a
wholly-owned subsidiary of the BG Group) in December 2006. Through this acquisition, KUFPEC
acquired the Chinguetti Exclusive Exploitation Authorization (EEA) in addition to PSC A and PSC
B. The three concessions are located offshore, Mauritania, West Africa.
The Chinguetti EEA contains the Chinguetti Oil
Field wherein gross oil production averaged 10,892
bpd during 2009, and the Tevet Oil Discovery. The
oil production decline rate for the Chinguetti Field
was partially overcome during 2009 through effective production optimization activities. The joint
venture will continue efforts during 2010 to optimize field production and thus prolong field life.
Options for the future decommissioning of the field
are being evaluated.
PSC A covers the shallow water area of Blocks 3, 4
and 5; and contains the Banda Gas (with oil rim)
Discovery. PSC B covers the deep water area of
Blocks 4 and 5 and contains the Tiof, Tevet Deep,
and Lebeidna Oil Discoveries. Development studies on the Banda Gas Discovery and the Tiof Oil
Discovery are ongoing; however, these developments face significant cost and product marketing
challenges.
The PSC A and PSC B licenses expired on 31st July
and 20th July 2009 respectively. The joint venture
partners are attempting to negotiate an extension to
the current exploration period of each PSC to continue their rights to the existing discoveries and the
remaining exploration potential. The Mauritanian
Government has granted provisional extensions under the current PSC terms until the conclusion of
the ongoing negotiations; but has also tied the approval of the extensions to the joint venture committing to develop the Banda Gas Field.
24
25
The joint venture partners and the government have
formed a joint Special Project Team (SPT) and approved the related scope of work to evaluate the commerciality of Banda Gas Field, with an end-June 2010
completion date. The joint venture’s main objective
for PSC A and PSC B during 2010 is to complete the
SPT study and obtain the desired extensions of the
final exploration periods.
CONGO
Marine BLOCK IX (KUFPEC 27%)
KUFPEC farmed-in on Premier’s interests in the Marine Block IX located offshore Congo effective 20
May 2008. The Marine Block IX is within a proven
petroleum province close to existing developed oil
fields. It has an area of 1044 sq km in water depths
ranging between 400m and 1500 m. The Frida pros-
pect, drilled during 2009, was plugged and abandoned
due to the lack of reservoir. Evaluation of the remaining exploration prospectivity within the Block (in
consideration of the results of Frida-1 well) is ongoing
and will form the basis for the decision to enter into
the next exploration period which starts effective 7th
June 2010.
Human Resources
one of kufpec regular employee meeting
Human Resouces
At KUFPEC, we firmly believe that
our people are the backbone of our
company and that they will remain
the true engine driving our success
and unremitting endeavors to pursue
promising international opportunities
worldwide.
DEVELOPING EMPLOYEES POTENTIAL
27
To this end, we continually strive not only to hire
Kuwaiti nationals throughout the company, but also
to ensure that they have the right training, tools and
resources to succeed. This was evident as KUFPEC
met and exceeded the Kuwaitization target for 2009.
KUFPEC also participated with KPC in their fresh
graduate recruitment campaign further showing
commitment and dedication in supporting our
national workforce.
Another major achievement was the establishment of
the Senior Technical Committee in 2009 to recruit
highly skilled staff. The committee was able to fill
over 90% of the 2009 vacancies.
KUFPEC continually strives to improve and
implement new technologies throughout the
Organization. This was achieved in 2009 by the
implementation of a new Oracle System tailored to
26
enhance the performance of Administration and
Human Resources affairs and promote better job
efficiency throughout Company.
Our belief that our employees are the most important
and valuable asset was clearly demonstrated this year
as KUFPEC, in collaboration with Schlumberger,
developed a technical program for our national
Petroleum Engineers and Geologists. The program
was basically aimed at increasing the know-how and
technical skills of our junior national workforce and
consequently enhancing KUFPEC’s capabilities to
compete worldwide.
INDEPENDENT AUDITOR’S REPORT
The Shareholder
Kuwait Foreign Petroleum Exploration Company
K.S.C. (Closed)
Kuwait
KUWAIT FOREIGN PETROLEUM
EXPLORATION COMPANY K.S.C.
(CLOSED) AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR’S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2009
INDEX
Page
Independent auditor’s report
29
Consolidated statement of financial position as 30
at 31 December 2009
Consolidated statement of income for the year
ended 31 December 2009
31
Consolidated statement of comprehensive
income for the year ended 31 December 2009
32
Consolidated statement of changes in equity
for the year ended 31 December 2009
33
Consolidated statement of cash flows
34
Notes to the consolidated financial statements
35-57
Al-Fahad & Co.
Salhia Complex, Gate 2, 4th Flor
P.O.Box 23049 Safat 13091State of Kuwait
Tel : +(965) 2438060
Tel : +(965) 2468934
Fax : +(965) 2452080
web: www.deloitte.com
28
Report on the Consolidated
Financial Statements
We have audited the accompanying consolidated
financial statements of Kuwait Foreign Petroleum
Exploration Company K.S.C. (Closed), (“the
Company”) and Subsidiaries (together referred to
as “the Group”), which comprise the consolidated
statement of financial position as at 31 December
2009, and the consolidated statements of income,
comprehensive income, changes in equity and
cash flows for the year then ended, and a summary
of significant accounting policies and other
explanatory notes.
Management’s Responsibility for the
Consolidated Financial Statements
Management is responsible for the preparation and
fair presentation of these consolidated financial
statements in accordance with International
Financial Reporting Standards. This responsibility
includes: designing, implementing and maintaining
internal control relevant to the preparation and fair
presentation of consolidated financial statements
that are free from material misstatement, whether
due to fraud or error; selecting and applying
appropriate accounting policies; and making
accounting estimates that are reasonable in the
circumstances. Auditor’s Responsibility
Our responsibility is to express an opinion on
these consolidated financial statements based on
our audit. We conducted our audit in accordance
with International Standards on Auditing. Those
standards require that we comply with ethical
requirements and plan and perform the audit
to obtain reasonable assurance whether the
consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures
in the consolidated financial statements. The
procedures selected depend on the auditor’s
judgment, including the assessment of the risks of
material misstatement of the consolidated financial
statements, whether due to fraud or error. In making
those risk assessments, the auditor considers
internal control relevant to the entity’s preparation
and fair presentation of the consolidated financial
statements in order to design audit procedures
that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An
audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness
of accounting estimates made by management, as
well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the accompanying consolidated
financial statements present fairly, in all material
respects, the financial position of the Group
as at 31 December 2009, and of its financial
performance and its cash flows for the year then
ended in accordance with International Financial
Reporting Standards.
Report on Other Legal and Regulatory
Requirements
Furthermore, in our opinion, proper books of
account have been kept by the Company and the
consolidated financial statements, together with
the contents of the report of the board of directors
relating to these consolidated financial statements,
are in accordance therewith. We further report that
we obtained all the information and explanations
that we required for the purpose of our audit
and that the consolidated financial statements
incorporate all information that is required by the
Commercial Companies Law of 1960, as amended,
and by the Company’s articles of association,
that an inventory count was duly carried out and
that, to the best of our knowledge and belief, no
violations of the Commercial Companies Law of
1960, as amended, nor of the articles of association
have occurred during the year ended 31 December
2009 that might have had a material effect on the
business of the Group or on its financial position.
Jassim Ahmad Al-Fahad
License No. 53-A17
29 March 2010
29
Kuwait Foreign Petroleum Exploration Company K.S.C. (Closed)
and subsidiaries
and subsidiaries
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF INCOME
For the year ended 31 December 2009
2009
KD 000’s
2008
KD 000’s
20,386
68,279
129
21,159
109,953
8,120
91,610
211
16,985
116,926
3,649
506,668
1,423
511,740
621,693
7,680
432,769
1,377
441,826
558,752
49,498
13,900
29,188
72,332
22,948
187,866
52,486
44,434
48,158
145,078
10
11
21
22
33,720
2,672
18,611
68,844
123,847
311,713
24,289
2,164
21,336
88,800
136,589
281,667
13
14
15
200,000
38,323
38,323
10,015
23,319
309,980
621,693
200,000
35,400
35,400
(17,889)
24,174
277,085
558,752
Notes
ASSETS
Current assets
Cash and bank balances
Trade and other receivables
Due from Parent Company and affiliates
Inventories
5
6
7
Non-current assets
Deferred tax asset
Fixed assets
Goodwill
8
TOTAL ASSETS
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
Tax liability
Due to Parent Company
Dividends payable
Current portion of long-term loan
9
24
22
Non-current liabilities
Decommissioning provision
Employees’ end of service benefits
Deferred tax liability
Long-term loan
Total liabilities
Equity
Share capital
Statutory reserve
Voluntary reserve
Foreign currency translation adjustments
Retained earnings
Total equity
TOTAL LIABILITIES AND EQUITY
Fahed Al-Ajmi
Notes
16
17
Revenue
Cost of sales
Gross profit
Exploration expenditure written off
Repair costs for damaged oil and gas properties
Net impairment losses
General and administrative expenses
23
18
Profit from operations
Unwinding of discount on decommissioning provision
Interest income
Other income
Foreign currency exchange (loss) / gain
Finance costs
Profit for the year before tax and directors’ fees
Income tax expense
Profit before directors’ fees
Directors’ fees
Profit for the year
10
23
19
20
2009
KD 000’s
235,401
(131,156)
104,245
2008
KD 000’s
264,931
(121,569)
143,362
(34,903)
(1,985)
(7,744)
(44,632)
59,613
(1,703)
192
2,191
(4,158)
(1,796)
54,339
(25,113)
29,226
(61)
29,165
(34,740)
(2,633)
(14,824)
(9,136)
(61,333)
82,029
(1,394)
1,077
2,137
(3,362)
80,487
(50,213)
30,274
(46)
30,228
Khaled A. Al-Qauod
Chairman & Managing
Director
Deputy Managing Director Finance & Administration
The notes set out on pages 8 to 34 form an integral part of these consolidated financial statements.
30
31
and subsidiaries
and subsidiaries
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Notes
Profit for the year
Other comprehensive income
Exchange differences on translating foreign operations
Other comprehensive income/(loss) for the year
Total comprehensive income for the year
2 & 32
2009
KD 000’s
29,165
2008
KD 000’s
30,228
27,904
27,904
57,069
(6,050)
(6,050)
24,178
Balance at 1 January 2008
Profit for the year
Other comprehensive income for the year
Dividends
Transfer to reserves
Balance at 1 January 2009
Profit for the year
Other comprehensive income for the year
Dividends
Transfer to reserves
Balance at 31 December 2009
Share
capital
Statutory
reserve
Foreign
currency
Voluntary translation
adjustments
reserve
KD 000’s
200,000
200,000
200,000
KD 000’s
32,373
3,027
35,400
2,923
38,323
KD 000’s
32,373
3,027
35,400
2,923
38,323
KD 000’s
(11,839)
(6,050)
(6,050)
(17,889)
27,904
27,904
10,015
Retained
earnings
Total
KD 000’s
53,616
30,228
30,228
(53,616)
(6,054)
24,174
29,165
29,165
(24,174)
(5,846)
23,319
KD 000’s
306,523
30,228
(6,050)
24,178
(53,616)
277,085
29,165
27,904
57,069
(24,174)
309,980
32
33
and subsidiaries
and subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE CONSOLIDATED FINANCAIL STATEMENTS
Note
OPERATING ACTIVITIES
Profit for the year before tax and directors’ fees
Adjustments for:
Depreciation, depletion and amortization
Net impairment losses
Exploration expenditure written off
Interest income
Finance costs
Unwinding of the discount on decommissioning provision
Charge / (reversal of allowance) for doubtful receivables
Allowance for slow moving and obsolete inventories
Provision for employees’ end of service benefits
Decrease/(increase) in trade and other receivables
Increase in inventories
Decrease in trade and other payables
Change in due to/from Parent Company and affiliates-net
Cash generated from operations
Income tax paid
Employees’ end of service benefits paid
Directors’ fees paid
Net cash generated by operating activities
INVESTING ACTIVITIES
Purchase of other fixed assets
Decrease in funds held by Parent Company
Adjustment of purchase consideration
Payment of decommissioning liability
Net additions to oil and gas properties
Interest received
Net cash used in investing activities
FINANCING ACTIVITIES
Decrease in loan from Parent Company
Increase in long-term loan
Finance costs paid
Dividends paid
Net cash used in financing activities
Effect of foreign currency translation
Net increase/(decrease) in cash and bank balances
Cash and bank balances at beginning of the year
Cash and bank balances at end of the year
5
2009
KD 000’s
2008
KD 000’s
54,339
80,487
75,012
1,985
34,903
(192)
1,796
1,703
28
28
551
170,153
23,303
(4,202)
(3,002)
29,270
215,522
(52,389)
(43)
(47)
163,043
60,744
14,824
34,740
(1,077)
3,362
1,394
(25)
2
910
195,361
(2,522)
(186)
(1,630)
(343)
190,680
(36,279)
(582)
(46)
153,773
(775)
(149,533)
192
(150,116)
(651)
10,926
3,126
(127)
(146,275)
1,077
(131,924)
(1,796)
(1,796)
1,135
12,266
8,120
20,386
(57,361)
88,800
(3,362)
(53,150)
(25,073)
(6,039)
(9,263)
17,383
8,120
34
1.
INCORPORATION AND PRINCIPAL ACTIVITIES
Kuwait Foreign Petroleum Exploration Company K.S.C. (Closed) (“the Company”) was registered in Kuwait in 1981 as
a wholly owned subsidiary of Kuwait Petroleum Corporation (“KPC”) (“the Parent Company”) and its registered address
is P.O. Box 5291, Safat 13053, State of Kuwait. The principal activities of the Company and its subsidiaries (together
referred to as “the Group”) are the exploration and development of oil and gas outside the State of Kuwait.
These consolidated financial statements were authorized for issue by the Chairman and Deputy Managing Director
on behalf of the Board of Directors on 29 March 2010. The General Assembly has the power to amend these
consolidated financial statements after issuance.
2.
ADOPTION OF NEW AND REVISED STANDARDS
Standards affecting amounts reported in the current period
During the year, the Group has adopted the following Standards, Interpretations, revisions and amendments to
International Financial Reporting Standards (“IFRS”) issued by International Accounting Standards Board which
are relevant to and effective for the Group’s financial statements beginning on or after 1 January 2009.
IAS 1 (revised 2007) Presentation of Financial Statements
The revised Standard has introduced a number of terminology changes (including revised titles for the consolidated
financial statements) and has resulted in a number of changes in presentation and disclosure. The revised standard
requires all non-owner changes in equity (i.e. comprehensive income) to be presented separately in a consolidated
statement of comprehensive income. The Group has elected to present the consolidated statement of income and
consolidated statement of comprehensive income separately. However, the revised Standard has had no impact on
the reported results or financial position of the Group.
IAS 23 (Revised 2007) Borrowing costs
The revised Standard has eliminated the previously available option to expense all borrowing costs that are directly
attributable to the acquisition, construction or production of a qualifying asset when incurred. Instead the Group will
now have to capitalise borrowing costs incurred on qualifying assets. However, the revised Standard has had no
impact on the previously or currently reported results or financial position of the Group as the transitional provisions
of this Standard permit an entity to continue expensing borrowing costs relating to qualifying assets for which the
commencement date for capitalisation is before the effective date (1 January 2009).
Annual Improvements 2008
In addition to the changes affecting amounts reported in the consolidated financial statements described above, the
Improvements have led to a number of changes in the detail of the Group’s accounting policies, some of which
are changes in terminology only, and some of which are substantive but have has no material effect on amounts
reported. The majority of these amendments are effective from 1 January 2009.
Standards and Interpretations in issue not yet effective
At the date of authorisation of these consolidated financial statements, the following Standards and
Interpretations were in issue but not yet effective:
• IAS 1(Revised) Presentation of Financial
Statements
Effective for annual periods beginning on or after
1 January 2010
• IAS 7(Revised) Statement of Cash Flows
1 January 2010
• IAS 17 (Revised) Leases
1 January 2010
• IAS 27 (Revised) Consolidated and Separate
Financial Statements
1 July 2009 and 1 January 2010
• IAS 28 (Revised) Investment in Associates
1 January 2010
35
and subsidiaries
and subsidiaries
2.
ADOPTION OF NEW AND REVISED STANDARDS (CONTINUED)
Standards and Interpretations in issue not yet effective (Continued)
• IAS 31 (Revised) Interests in Joint Ventures
1 January 2010
• IAS 32 (Revised) Financial Instruments
Presentation
1 February 2010
• IAS 36 (Revised) Impairment of Assets
1 January 2010
• IAS 38 (Revised) Intangible Assets
1 July 2009
• IAS 39 (Revised) Financial Instruments:
Recognition and Measurement
1 July 2009
• IFRS 1 (Revised) First-time Adoption of
International Financial Reporting Standards
1 January 2010
• IFRS 2 (Revised) Share-based Payments
1 January 2010
• IFRS 3 (Revised) Business Combinations
1 July 2009
• IFRS 5 (Revised) Non-current Assets Held for Sale
and Discontinued Operations
1 July 2009
• IFRS 8 Operating Segments
1 January 2010
• IFRS 9 Financial Instrument: Classification
and Measurement
1 January 2013
• IFRIC 17 Distribution of non cash assets to owners
1 July 2009
• IFRIC 18 Transfers of Assets from Customers
1 July 2009
• IFRIC 19 Extinguishing Financial Liabilities with
Equity Instruments
1 July 2010
The directors anticipate that the adoption of these Standards and Interpretations once they become effective in future
periods will not have a material financial impact on the consolidated financial statements of the Group in the period
of initial application.
3.
SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards and applicable requirements of Ministerial order No. 18 of 1990.
36
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of preparation
These consolidated financial statements have been prepared under the historical cost convention. The principal
accounting policies are set out below.
Basis of consolidation
These consolidated financial statements incorporate the financial statements of the Company and entities controlled
by the Company (its subsidiaries) detailed in note 26. Control is achieved where the Company has the power to
govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of
income from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business
combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities
incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any
costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognized at their fair
values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in
accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognized and
measured at fair value less costs to sell.
Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost
of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognized. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is
recognized immediately in the consolidated statement of income.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected
to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of
the unit pro-rate or the basis of the carrying amount of each asset in the unit. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.
Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity
that is subject to joint control that is when the strategic financial and operating policy decisions relating to the
activities of the joint venture require the unanimous consent of the parties sharing control.
Where a Group entity undertakes its activities under joint venture arrangements directly, the Group’s share of jointly
controlled assets and any liabilities incurred jointly with other venturers are recognized in the financial statements
of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of
interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s
share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised when it is
probable that the economic benefits associated with the transactions will flow to/from the Group and their amount
can be measured reliably.
37
and subsidiaries
and subsidiaries
3.
Interests in joint ventures (Continued)
Joint venture arrangements that involve the establishment of a separate entity in which each venturer has an interest are
referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using proportionate
consolidation. The Group’s share of the assets, liabilities, income and expenses of jointly controlled entities are
combined with the equivalent items in the consolidated financial statements on a line-by-line basis.
Where the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the
extent of the Group’s interest in the joint venture.
Financial assets
Financial assets are recognised on the Group’s consolidated statement of financial position when the Group becomes
a party to the contractual provisions of the instrument.
Effective interest rate method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.
Cash and bank balances consist of cash on hand and bank current accounts.
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost
using the effective interest rate method, less any impairment. Interest income is recognised by applying the effective
interest rate, except for short-term receivables when the recognition of interest would be immaterial. Appropriate
allowances for estimated irrecoverable amounts are recognised in the consolidated statement of income when there
is objective evidence that the asset is impaired.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each consolidated statement of financial position date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred
after the initial recognition of the financial asset, the estimated future cash flows of the asset have been impacted.
For trade receivables, objective evidence of impairment could include: (i) significant financial difficulty of the issuer
or counterparty; or (ii) default or delinquency in interest or principal payments; or (iii) it becoming probable that the
borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired
individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a
portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number
of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in
national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original
effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When
a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries
of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the
allowance account are recognised in the consolidated statement of income.
38
3.
Financial assets (Continued)
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or
it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If
the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control
the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it
may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial
asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
Financial liabilities
Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the
effective interest rate method.
Derecognition of financial liabilities
The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled
or they have expired.
Oil and gas properties
Exploration and appraisal costs
Exploration and appraisal costs are accounted for under the successful efforts method. Under this method,
geological and geophysical costs are expensed as incurred during the exploration phase. Exploratory drilling costs
are tentatively capitalized pending determination of whether the well finds commercial reserves. Wells which are
assigned commercial reserves remain capitalized. All other exploratory wells and exploration expenditure including
licence fees are expensed. Costs incurred to acquire an exploration property are capitalised when first incurred
until either the property is impaired or transferred to producing property account on the discovery of commercial
reserves.
Fields under development and in production
All field development costs including seismic geological and geophysical studies, wells, related plant and equipment,
mineral interest in properties and financing charges are capitalised.
Reserves
Oil and gas reserves consist of both proved and probable reserves. These are calculated using the latest estimates
provided by the Group’s technical staff, which, are based on estimates provided by the field operator.
Depreciation, depletion and amortisation
The purchase, capitalised exploration and appraisal and development costs of each producing field, together with
anticipated future capital costs calculated at price levels ruling at the consolidated statement of financial position
date, are depreciated, depleted and amortised on a unit-of-production basis. Depreciation is calculated by reference
to the proportion that production for the period bears to the total of the estimated remaining reserves as at the end of
the period plus the production in the period.
Impairment
The recoverability of the amounts at which fields either in production or under development are recorded in the
accounts is assessed on a field-by-field basis against the likely discounted future net revenues to be derived from
the estimated remaining commercial reserves. Future net revenues are computed using prices and costs according
to management’s forecast at the year end. A provision is made where the comparison indicates impairment in the
carrying value of the interests.
39
and subsidiaries
and subsidiaries
3.
Decommissioning costs
The decommissioning provision is calculated based on the net present value of the Group’s share of the estimated
future cost of decommissioning and site restoration required for facilities in place. This is calculated using the latest
estimates provided by the Group’s technical staff, which are based upon estimates provided by the field operators.
An associated decommissioning asset is recognised, which is amortised for each field on a unit-of-production basis
in accordance with the Group’s policy for depletion and depreciation of oil and gas properties. Period charges for
changes in the net present value of the decommissioning provision arising from the unwinding of the discount are
included in finance costs.
Other fixed assets
Other fixed assets are stated at cost less accumulated depreciation and any accumulated impairment losses. Cost
includes the purchase price and directly associated costs of bringing the asset to a working condition for its intended
use. Depreciation is calculated based on the estimated useful lives of the applicable assets on a straight-line basis. The
estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any
changes in estimate accounted for on a prospective basis. Maintenance and repairs, replacements and improvements
of minor importance are expensed as incurred. Significant improvements and replacement of assets are capitalised.
The gain or loss arising on the disposal or retirement of other fixed assets is determined as the difference between the
sales proceeds and the carrying amount of the asset and is recognised in the consolidated statement of income.
Operating leases
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which
they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from
the leased asset are consumed.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and revenue
can be reliably measured.
Revenue represents invoiced amounts from the sale of the Group’s share of oil and gas production and is recognized
on the basis of the Group’s net working interest (entitlement method).
Interest income is recognised on an accrual basis in accordance with the substance of the relevant agreement.
Royalties
Royalties are accounted for in the consolidated statement of income in the same period as the income to which they
relate and are included within operating expenses. Royalty arrangements that are based on production, sales and
other measures are recognised by reference to the underlying arrangement.
Inventories
Crude oil is valued at the lower of cost or net realizable value. Other inventories comprising mainly of spare parts,
materials and supplies are valued at cost, determined principally on a weighted average cost basis, less allowance
for any obsolete or slow moving items. Purchase cost includes the purchase price, import duties, transportation,
handling and other direct costs.
40
3.
Employees’ end of service benefits
Provision is made for amounts payable to employees under the Kuwaiti Labor Law, the Kuwait Social Security Law
and the Group’s terms of employment. The provision, which is unfunded, is determined as the liability that would
arise as a result of the involuntary termination of staff at the consolidated statement of financial position date, on the
basis that this computation is a reliable approximation of the present value of this obligation.
Foreign currencies
The individual financial statements of each group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each entity are expressed in US Dollars, which is the functional
currency of the Company. The presentation currency for the consolidated financial statements is the Kuwaiti
Dinar (“KD”).
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the
transactions. At each consolidated statement of financial position date, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at the consolidated statement of financial position date. Nonmonetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing
at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated.
Exchange differences are recognised in the consolidated statement of income in the period in which they arise
except for exchange differences on monetary items receivable from or payable to a foreign operation for which
settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and
which are recognised in the foreign currency translation reserve and recognised in consolidated profit or loss on
disposal of the net investment.
the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are expressed in KD using exchange rates prevailing at the consolidated statement of financial position
date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used.
The resulting exchange differences arising are classified as equity and transferred to the Group’s foreign currency
translation adjustments. Such exchange differences are recognised in the consolidated statement of income in the
period in which the foreign operation is disposed of.
Taxation
Certain of the Company’s subsidiaries are subject to taxes on income in various foreign jurisdictions. Income tax
expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
consolidated statement of income because it excludes items of income or expense that are taxable or deductible in
other years and it further excludes items that are never taxable or deductible. The subsidiaries’ liability for current
tax is calculated using tax rates that have been enacted or substantively enacted by the consolidated statement of
financial position date.
Deferred tax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted
for using the consolidated statement of financial position liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that taxable profits will be available against which those
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary
41
and subsidiaries
and subsidiaries
3.
difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each consolidated statement of financial position date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part
of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the
liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively
enacted by the consolidated statement of financial position date. The measurement of deferred tax liabilities and
assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting
date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
3.
Derivatives
In accordance with IAS 39, “Financial Instruments: Recognition and Measurement”, derivative financial instruments,
unless designated as hedges, are carried in the consolidated statement of financial position at fair value, with changes
in the fair value included in the consolidated statement of income.
Contingencies
A contingent asset is not recognized in the consolidated financial statements but disclosed when an inflow of
economic benefits is probable.
Contingent liabilities are not recognized in the consolidated financial statements unless the outflow of resources
embodying economic benefits is probable and the amount of the obligation can be measured reliably. They are
disclosed as contingent liabilities when the possibility of an outflow of resources embodying economic benefits
is remote.
Borrowing costs
Borrowing costs are calculated on the accrual basis and are recognised in the consolidated statement of income in
the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be
42
made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation
at the consolidated statement of financial position date, taking into account the risks and uncertainties surrounding
the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
Impairment of tangible assets
At each consolidated statement of financial position date, the Group reviews the carrying amounts of its tangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment
loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the
higher of fair value less costs to sell or value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset (cashgenerating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.
Current and deferred tax for the period
Current and deferred tax are recognised as an expense or income in the consolidated statement of income, except when
they relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity,
or where they arise from the initial accounting for a business combination. In the case of a business combination, the
tax effect is taken into account in calculating goodwill or in determining the excess of the acquirer’s interest in the
net fair value of the acquiree’s identifiable assets, liabilities, and contingent liabilities over cost.
The Group operates internationally, giving rise to significant exposure to market risks from changes in commodity
prices, interest and foreign exchange rates. In the ordinary course of business, the Group has entered into certain
long-term sales contracts, which, under IAS 39, include embedded derivatives.
An embedded derivative is a component of a contract, which has the effect that the cash flows arising under the
contract vary, in part, in a similar way to a standalone derivative. IAS 39 requires that such embedded derivatives are
separated from the host contracts and accounted for as derivatives, classified as held for trading and carried at fair
value, with changes in fair value being included in the consolidated statement of income.
4.
JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in note 3, management is required
to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period, or in the
period of the revision and future periods if the revision affects both current and future periods.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty
at the consolidated statement of financial position date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year.
Depletion of oil and gas properties
Depletion of the cost of oil and gas properties and information reported on estimated quantities of proved oil
and gas reserves are based on estimated oil and gas reserves which have been determined by competent and
qualified petroleum engineers. Management believes these reserves to be commercially productive and will
provide revenues to the Group adequate to recover remaining net un-depreciated and un-depleted capitalized
oil and gas properties as at 31 December 2009.
43
and subsidiaries
and subsidiaries
4.
JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONTINUED)
6.
Ageing of past due but not impaired
Key sources of estimation uncertainty (Continued)Decommissioning liability
The Group has made provision for decommissioning costs relating to the future abandonment of fields based
on the present value of expected expenditures required to settle the obligation. The estimates used to determine
decommissioning liability have been reviewed and revised, as appropriate, during the year ended
31 December 2009, by competent and qualified petroleum engineers.
61 – 90 days
91 – 120 days
Total
Movement in the allowance for doubtful debts is as follows:
Impairment of oil and gas properties
Determining whether oil and gas properties are impaired requires management to estimate the future net revenue
from oil and gas reserves attributable to the Group’s interest in that field. An impairment loss of KD 16,609 thousand
(2008: KD 10,219 thousand) was recognised during 2009.
Balance at beginning of the year
Charge /( reversal of allowance) for the year
Balance at end of the year
Impairment of other fixed assets and useful lives
The Group’s management tests annually whether tangible assets have suffered impairment in accordance with
accounting policies stated in note 3. The recoverable amount of an asset is determined based on value-in-use method.
The method uses estimated cash flow projections over the estimated useful life of the asset discounted using market
rates. The Group’s management determines the useful life of other fixed assets and the related depreciation charge.
The depreciation charge for the year will change significantly if actual life is different from the estimated useful life
of the asset.
5.
2009
KD 000’s
1
20,385
20,386
CASH AND BANK BALANCES
Cash in hand
Cash at banks
2008
KD 000’s
1
8,119
8,120
2009
KD 000’s
38,480
(1,720)
36,760
20,849
960
9,710
68,279
TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Allowance for doubtful receivables
Due from joint venture participants
Prepaid expenses
Other receivables
2008
KD 000’s
28,611
(1,692)
26,919
26,237
268
38,186
91,610
The average credit period on sales is 60 days. No interest is charged on the overdue trade receivables. The Group has
provided fully for all irrecoverable trade receivables determined by reference to past default experience.
As at 31 December 2009, trade receivables of KD 34,376 thousand (2008: KD 22,654 thousand) were
fully performing.
Included in the Group’s trade receivables balance are debtors with a carrying amount of KD 2,384 thousand (2008:
KD 4,265 thousand) which are past due at the reporting date for which the Group has not provided as there has not
been a significant change in credit quality and the amounts are still considered recoverable.
44
2009
KD 000’s
1,238
1,146
2,384
2008
KD 000’s
1,445
2,820
4,265
2009
KD 000’s
1,692
28
1,720
2008
KD 000’s
1,717
(25)
1,692
In determining the recoverability of a trade receivable, the Company considers any change in the credit quality of
the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit
risk is limited due to the customer base being large and unrelated. Accordingly, management believes that there is
no further credit provision required in excess of the allowance for doubtful debts.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of trade receivables
mentioned above. All the impaired trade receivables are above 360 days (2008: 360 days).
7.
INVENTORIES
Crude oil
Spare parts, materials and supplies
Less: allowance for slow moving and obsolete inventories
Cash at banks represent bank current accounts denominated in KD, US Dollars, Australian Dollars and Pakistani
Rupees
6.
TRADE AND OTHER RECEIVABLES
2009
KD 000’s
4,740
16,583
21,323
(164)
21,159
2008
KD 000’s
3,012
14,109
17,121
(136)
16,985
Spare parts, materials and supplies are used in operations and are not held for re-sale.
8.
FIXED ASSETS
Cost
At 1 January 2008
Additions
Write off of unsuccessful exploration costs
Disposals
Currency translation effects
At 1 January 2009
Additions
Write off of unsuccessful exploration costs
Disposals
At 31 December 2009
Other
Oil and gas Decommissioning
properties
fixed assets
assets
KD 000’s
KD 000’s
KD 000’s
707,251
146,275
(34,740)
(23,954)
794,832
149,533
(34,903)
75,210
984,672
45
16,601
5,568
(16)
22,153
1,944
4,461
28,558
8,034
651
(40)
24
8,669
775
(6)
62
9,500
Total
KD 000’s
731,886
152,494
(34,740)
(40)
(23,946)
825,654
152,252
(34,903)
(6)
79,733
1,022,730
and subsidiaries
and subsidiaries
8.
FIXED ASSETS (CONTINUED)
Depreciation, depletion,
amortization and impairment losses
At 1 January 2008
Charge for the year
Disposals
Net impairment losses (note 18)
At 1 January 2009
Charge for the year
Disposals
Net impairment losses (note 18)
At 31 December 2009
Carrying amount
At 31 December 2009
At 31 December 2008
Annual depreciation rate
9.
Other
Oil and gas Decommissioning
properties
fixed assets
assets
KD 000’s
KD 000’s
KD 000’s
12.
Total
KD 000’s
335,043
56,759
6,715
(21,142)
377,375
70,201
1,985
47,211
496,772
8,676
3,363
90
12,129
4,132
(1,074)
15,187
2,773
622
(40)
26
3,381
679
(6)
49
4,103
346,492
60,744
(40)
6,715
(21,026)
392,885
75,012
(6)
1,985
46,186
516,062
487,900
417,457
13,371
10,024
5,397
5,288
20 %
506,668
432,769
TRADE AND OTHER PAYABLES
Joint venture payables and accruals
Accrued payroll and leave pay
10.
DECOMMISSIONING PROVISION
Unwinding of discount
Changes in estimates
Payments during the year
Currency translation effect
EMPLOYEES’ END OF SERVICE BENEFITS
Charge for the year
Payments during the year
46
SHARE CAPITAL
The authorized, issued and fully paid up share capital consists of 200,000,000 shares of KD 1 each
(2008: 200,000,000 shares of KD 1 each).
14.
STATUTORY RESERVE
As required by the Commercial Companies Law and the Company’s Articles of Association, 10% of profit for the
year is to be transferred to the statutory reserve until the reserve reaches a minimum of 50% of the paid up capital.
The statutory reserve is not available for distribution except in cases stipulated by the Commercial Companies law
and the Company’s Articles of Association.
15.
2009
KD 000’s
47,697
1,801
49,498
2008
KD 000’s
51,123
1,363
52,486
16.
2009
KD 000’s
24,289
1,703
1,944
5,784
33,720
2008
KD 000’s
20,363
1,394
5,568
(127)
(2,909)
24,289
17.
2009
KD 000’s
2,164
551
(43)
2,672
The remuneration of directors and other members of key management (including directors’ fees) during the year
were as follows:
2009
2008
KD 000’s
KD 000’s
Short-term benefits
948
1,016
Termination benefits
325
186
1,273
1,202
VOLUNTARY RESERVE
In accordance with the Company’s Articles of Association, 10% of profit for the year is to be transferred to the
voluntary reserve. Such transfer may be discontinued by a resolution at the General Assembly.
The decommissioning provision relates to all of the Group’s interests that are currently producing or
under development.
11.
13.
COMPENSATION OF KEY MANAGEMENT PERSONNEL
Oil sales
Gas sales
Pipeline tariffs
COST OF SALES
Operating costs
Depletion of oil and gas properties
Royalties
Depreciation of decommissioning asset
18.
2008
KD 000’s
1,836
910
(582)
2,164
REVENUE
2009
KD 000’s
120,496
114,665
240
235,401
2008
KD 000’s
151,862
112,713
356
264,931
2009
KD 000’s
48,511
70,201
8,312
4,132
131,156
2008
KD 000’s
46,585
56,759
14,862
3,363
121,569
NET IMPAIRMENT LOSSES
During the year, the Group incurred impairment losses on certain oil and gas properties of KD 16,609 thousand
(31 December 2008: KD 10,219 thousand). The Group did not recognise impairment losses (31 December 2008:
KD 8,109 thousand) on goodwill originally recognised on acquisition of certain subsidiaries. The impairment loss
realized was due to decrease in oil and gas reserves in related fields.
During the year, the Group reversed previously recognised impairment losses of KD 14,624 thousand (2008: 3,504
thousand). The reversal is due to an increase in the estimated future cash flows from these oil and gas properties
determined by reference to current economic factors.
47
and subsidiaries
and subsidiaries
19.
INCOME TAX EXPENSE
2009
KD 000’s
The charge for the year comprises:
Foreign tax
Current:
- tax expense on profits
- Reversal of excess provision for income taxes
Deferred:
- charge for the year - income taxes
- (Refund) / charge for the year - Petroleum Resource Rent Tax
(“PRRT”)
20.
2008
KD 000’s
29,325
(3,439)
38,516
-
2,691
(3,464)
25,113
8,516
3,181
50,213
STAFF COSTS
Profit for the year is stated after charging staff and related costs of KD 7.3 million (2008: KD 5.5 million).
21.
DEFERRED TAX LIABILITY
2009
KD 000’s
21,336
2,691
(3,464)
(1,952)
18,611
Provision at 1 January
Deferred tax charge for the year - income taxes
Deferred tax charge for the year – PRRT
Currency translation effect
Provision at 31 December
2008
KD 000’s
8,302
8,516
3,181
1,337
21,336
The rates of taxation applicable to profits arising in foreign operations vary between 25% and 56%.
Deferred tax arises primarily on temporary differences in depreciation applicable to fixed assets, including
decommissioning assets, as between the consolidated financial statements and the various foreign operations
tax returns.
The effective average rate of tax borne by the Group is 46% for 2009 (75% for 2008).
22.
LONG-TERM LOAN
Due to local bank
Current
2009
KD 000’s
22,948
2008
KD 000’s
-
Non-current
2009
KD 000’s
68,844
2008
KD 000’s
88,800
The long-term loan of US Dollars 320 million equivalent to KD 91 million ( 31 December 2008: US Dollars 320
million equivalent to KD 89 million) denominated in US Dollars obtained in 2008 from a consortium of local and
international banks bears interest at the rate of LIBOR plus 0.475% per annum. During 2009 the average interest
rate on the loan was 1.767% per annum. The loan is unsecured and repayable in eight equal semi-annual instalments
starting from 11 May 2010.
23.
REPAIR COSTS FOR DAMAGED OIL AND GAS PROPERTIES
A pipeline rupture and fire occurred at one of the Group’s gas processing and transportation hubs on 3 June 2008
resulting in damage to the hub. The cost of repairing the hub amounted to KD 2,633 thousand in 2008. The Group
received the insurance claim relating to the damage amounting to KD 2,226 thousand in 2009 and is included in
other income.
24.
DUE TO PARENT COMPANY
The amount due to Parent Company is unsecured and non-interest bearing, with no fixed term of repayment.
48
25.
FINANCIAL INSTRUMENTS
Capital risk management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the
return to the shareholder. The Group’s overall strategy remains unchanged from 2008.
The capital structure of the Group consists of equity comprising issued share capital, statutory reserve and voluntary
reserve as disclosed in notes 13, 14 and 15 respectively, foreign currency translation adjustments and retained
earnings.
Gearing ratio
The gearing ratio at year end was as follows:
2009
2008
KD 000’s
KD 000’s
Debt (i)
91,792
88,800
(20,386)
(8,120)
Net debt
71,406
80,680
Equity
309,980
277,085
Net debt to equity ratio
23%
29%
(i) Debt is defined as long-term loan as detailed in note 22.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset
and financial liability are disclosed in note 3 to these consolidated financial statements.
Categories of financial instruments
Financial assets
Financial liabilities
Trade and other payables
Due to Parent Company
Dividends payable
Long-term loan
2009
KD 000’s
2008
KD 000’s
20,386
67,319
129
8,120
91,342
211
49,498
29,188
72,332
91,792
52,486
48,158
88,800
Financial risk management objectives
The Group’s management monitors and manages the financial risks relating to the operations of the Group through
internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk
(including commodity price risk, interest rate risk and foreign currency risk), credit risk and liquidity risk.
Market risk
Market risk is the risk that changes in market prices, such as commodity prices, interest rates and foreign exchange
rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
The Group is exposed to international commodity-based markets. As a result, it can be affected by changes in crude
oil, natural gas and petroleum product prices and interest rates and foreign exchange rates. The Group has long-term
gas sales agreements with prices denominated in foreign currencies and prices escalated according to various inflation
indices. The Group does not use derivative instruments either to manage risks or for speculative purposes.
49
and subsidiaries
and subsidiaries
25.
FINANCIAL INSTRUMENTS (CONTINUED)
25.
Categories of financial instruments (Continued)
Credit risk management
Price risk management
Volatility in oil and gas prices is a pervasive element of the Group’s business environment.
The Group is a seller of crude oil, which is typically sold under short-term arrangements priced in US Dollars at
current market prices.
The Group also sells gas under various long-term agreements at prices set in US Dollars and escalated according to
certain energy and inflation indices. Certain of the gas sales contracts contain embedded derivatives. Management
has estimated that the embedded derivatives included in these contracts are such that either a) they do not require
separation from the host contract or b) the Mark to Market adjustments that arise at 31 December 2009 and 31
December 2008 are immaterial to the net assets and results of the Group.
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate
fluctuations arise. Exchange rate exposures are managed within approved policy parameters.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the
reporting date are as follows:
Assets
Liabilities
2009
KD 000’s
Australian Dollars
Other
FINANCIAL INSTRUMENTS (CONTINUED)
9,118
960
2008
KD 000’s
759
1,016
2009
KD 000’s
2008
KD 000’s
6,151
3,036
5,590
9,356
Foreign currency sensitivity analysis
The Group’s main exposure is to fluctuations in the Australian Dollar.
The following table details the Group’s sensitivity to a 10% increase in the KD against the Australian Dollar and
others. A positive number indicates an increase in profit and a negative number indicates a decrease in profit. There
has been no change in the methods and the assumptions used in the preparation of the sensitivity analysis.
Impact on consolidated statement of income
Australian Dollars
Others
2009
KD 000’s
2008
KD 000’s
(297)
208
483
834
Interest rate risk management
The Group is exposed to interest rate risk as it borrows funds from the Parent Company and banks.
Interest rate sensitivity analysis
The Group’s exposure to interest rates on long-term loan is detailed in note 22 to these consolidated financial
statements.
The following table illustrates the sensitivity of the profit for the year to a reasonably possible change in interest
rates of + 1% with effect from the beginning of the year. These changes are considered to be reasonably possible
based on observation of current market conditions. The calculations are based on the Group’s financial instruments
held at each consolidated statement of financial position date. All other variables are held constant. There has been
no change in the methods and the assumptions used in the preparation of the sensitivity analysis.
A positive number below indicates an increase in profit and negative number indicates decrease in profit. A 1%
decrease in the interest rates would have the opposite effect.
2009
2008
KD 000’s
KD 000’s
Impact on consolidated statement of income
(1,016)
(892)
50
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group. The Group has adopted a policy of only dealing with creditworthy counterparties. The Group’s exposure
and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions
concluded is spread amongst approved counterparties.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas.
Ongoing credit evaluation is performed on the financial condition of accounts receivable.
The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties
having similar characteristics. The Group defines counterparties as having similar characteristics if they are related
entities.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit
risk at the reporting date was:
Carrying amount
2009
2008
KD 000’s
KD 000’s
20,385
8,119
Bank balances
67,319
91,342
129
211
87,833
99,672
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
Carrying amount
2009
2008
KD 000’s
KD 000’s
8,253
9,089
16,462
23,816
3,896
5,575
28,611
38,480
Africa
Asia
Other regions
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
Ultimate responsibility for liquidity risk management rests with the management, which has built an appropriate
liquidity risk management framework for the management of the Group’s short, medium and long-term funding
and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and
banking facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities. All the financial liabilities of the Group are due within one year except the long-term
loan. The long-term loan along with finance costs payable amounting to KD 94,506 thousand is due between one
and five years.
Fair value of financial instruments
Management believes that the fair value of all of the Group’s financial assets and financial liabilities, except for
the long-term loan that matures between one to five years (See note 22), is not significantly different from their
respective carrying values.
51
and subsidiaries
and subsidiaries
26.
SUBSIDIARY COMPANIES
26.
The subsidiaries of the Company are as follows:
Country of
Incorporation
Country of
Operation
KUFPEC (China) Inc.
Panama
China
KUFPEC (Italy) Ltd.
KUFPEC (Egypt) Ltd.
United Kingdom
Cayman Islands
-
KUFPEC (Indonesia) Ltd.
Cayman Islands
Indonesia
KUFPEC (Algeria) Ltd.
KUFPEC (Sudan) Ltd.
Cayman Islands
Cayman Islands
Algeria
Sudan
KUFPEC Regional Ventures
(Indonesia) Ltd.
Cayman Islands
Indonesia
KUFPEC (Tunisia) Ltd.
Cayman Islands
KUFPEC (Malaysia) Ltd.
SUBSIDIARY COMPANIES (CONTINUED)
Country of
Incorporation
Country of
Operation
KUFPEC (Italy) B.V.
KUFPEC Philippines (Onshore) B.V.
KUFPEC (Pakistan) B.V.
Netherlands
Netherlands
Netherlands
Pakistan
KUFPEC Indonesia ( Natuna ) B.V.
Netherlands
Indonesia
KUFPEC Indonesia ( Pangkah) B.V.
Netherlands
Indonesia
KUFPEC Pakistan Holdings B.V.
Netherlands
Pakistan
Area office & Market survey
Area office, Market survey, Oil & Gas
Exploration / Development / Production
PKP Kirthar B.V.
Netherlands
Pakistan
Mauritania Holdings B.V.
Netherlands
Tunisia
Area office & Market survey
PKP Exploration 2 Ltd
United Kingdom
Cayman Islands
Malaysia
PKP Kadanwari Ltd
Japan
KUFPEC (Yemen) Ltd.
Cayman Islands
Yemen
KUFPEC (Ivory Coast) Ltd
Cayman Islands
KUFPEC (Aden) Ltd.
Cayman Islands
Yemen
KUFPEC Yemen (East Shabwa) Ltd.
KUFPEC (Holdings) Ltd.
Cayman Islands
Cayman Islands
Global
KUFPEC Philippines (SC-46) Ltd
KUFPEC Indonesia (Buton) Ltd
Cayman Islands
Cayman Islands
KUFPEC Malaysia ( SB 312 ) Ltd
Cayman Islands
KUFPEC (Seram) Ltd.
KUFPEC Indonesia (Onshore) B.V.
KUFPEC (Malaysia Sabah) Ltd.
International Energy Development
Corporation (Congo) Ltd.
Corporation (Egypt) Ltd.
Corporation (Sudan) Ltd.
Energy Development Corporation B.V.
KUFPEC Australia Pty Ltd.
Bahamas
Netherlands
Cayman Islands
Bermuda
-
Oil & Gas Exploration / Development /
Production
Production
Production
Dormant
Production
Dormant
Dormant
Dormant
Dormant
KUFPEC Philippines (SC-60) Ltd
Cayman Islands
Bermuda
Bermuda
-
Dormant
KUFPEC Indonesia (Pangkah
Bermuda) Ltd
KUFPEC Syria (Block 17) Ltd.
KUFPEC Congo (Marine IX) Ltd.
Production
Mauritania Oil & Gas Exploration / Development /
Production
Pakistan
Production
Pakistan
Production
Ivory Coast Oil & Gas Exploration / Development /
Production
Dormant
Indonesia
Production
Malaysia
Production
Philippines Oil & Gas Exploration / Development /
Production
Dormant
-
Cayman Islands
Cayman Islands
-
Congo
Bermuda
-
Dormant
KUFPEC Vietnam (Block 19) Ltd.
Cayman Islands
Vietnam
Netherlands
Australia
Australia
Australia
Cayman Islands
Vietnam
KUFPEC (Perth) Pty Ltd.
Varanus Pty Ltd.
KUFPEC Australia (Julimar) Pty.Ltd.
Australia
Australia
Australia
Australia
KUFPEC Bangladesh
(Block SS-08-05) Ltd.
Cayman Islands
Cayman Islands
-
KUFPEC Australia (WA 356Permit)
Pty. Ltd.
KUFPEC (Finance) B.V.
Australia
Australia
Netherlands
-
Holding Company
Area office, Oil & Gas Exploration /
Development / Production
Dormant
Dormant
Production
Production
Dormant
Company’s Name
52
Egypt
Type of Activity
Production
Dormant
Area office, Market survey, Oil & Gas
Exploration / Development / Production.
Production
Dormant
Production
Company’s Name
53
Type of Activity
Dormant
Dormant
Production
Production
Production
Area office, Market survey and Holding
Company
Dormant
Production
Production
Production
Dormant
Dormant
and subsidiaries
and subsidiaries
27.
OIL AND GAS RESERVES (Unaudited)
28.
Crude Oil
Proved and probable reserves at beginning
of year
- Fields in production
- Projects under development
Changes during the year
- Revision of previous estimates
- Production
Proved and probable reserves at end of year
- Fields in production
- Projects under development
Gas
Gas
Total
(mmbbls)
(bcf)
(mmboe)
(mmboe)
53.95
53.95
968.64
151.10
1,119.74
163.63
28.56
192.19
217.58
28.56
246.14
1.00
(6.98)
(5.98)
(21.99)
(90.33)
(112.32)
(3.71)
(14.93)
(18.64)
(2.71)
(21.91)
(24.62)
47.84
0.13
47.97
821.28
186.14
1,007.43
138.45
35.11
173.56
186.29
35.24
221.53
Proven reserves are the quantities of crude oil and natural gas which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and
operating conditions.
Probable reserves are those additional reserves which are not yet proven but together with proven reserves are
estimated to have a 50% or better chance of being technically and economically producible.
Oil reserves include the oil equivalent of natural gas. Oil and gas reserves cannot be measured exactly since
estimation of reserves involves subjective judgment and arbitrary determinations. Therefore, all estimates are
subject to periodic revision.
Reserves, reserves volumes and reserves related information and disclosure are referred to as “unaudited” as a
means of clarifying that this information is not covered by the audit opinion of the independent auditor that has
audited and reported on the consolidated financial statements of the Group.
54
JOINT VENTURE INTERESTS
Operstor
Country
Block
Apache
Santos
Santos
Apache
Apache
Apache
Apache
Apache
Santos
Santos
Apache
Apache
CNOOC
Premier
IEOC
IEOC
Apache
Shell
Hess
PICO
Premier
CITIC
Japex
Hess
Edison
Edison
Petrofac
Hess
Petronas arigali
Petronas
Petronas
Petronas
Mari Gas
ENI
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
China
Congo
Egypt
Egypt
Egypt
Egypt
Egypt
Egypt
Indonesia
Indonesia
Indonesia
Indonesia
Ivory Coast
Ivory Coast
Malaysia
Malaysia
Malaysia
Mauritania
Mauritania
Mauritania
Pakistan
Pakistan
Harriet
Mutineer-Exeter
WA-264-P
WA-246-P
WA-356-P
EP 363
WA-335-P
WA-192-P
WA-191-P
Interest
(Unaudited)
WA-8-L
VIC/P59
WA 427
Yacheng 13-1
Marine Block IX
North Bardawil
Tinah (Block 24)
Ras Kanayes
West Sitra
West Med Block 1
Geisum
Natuna Sea Block A
Seram (Non-Bula)
Buton
Pangkah
CI-24
CI-102
PM 304 (Cendor)
SB 302 7T-11 Belud South
SB 312
Chinguetti
PSC-A (Banda)
PSC-B
Bolan (Zarghun South)
Kirthar (Badhra Area A)
55
Remarks
19.2771%
33.40%
33.3333%
20.00%
35.00%
12.79%
24.50%
35.00%
33.40%
42.6316%
35.00%
35.00%
14.70%
27.00%
36.00%
36.00%
36.36%
25.00%
10.00%
40.00%
33.33%
30.00%
30.00%
25.00%
33.75%
27.00%
25.00%
40.00%
40.00%
10.234%
13.084%
11.63%
3.75%
6.00%
Paying Interest 30%
Paying Interest 40 %
Paying Interest 40%
Paying interest 37.50%
and subsidiaries
and subsidiaries
28.
JOINT VENTURE INTERESTS (CONTINUED)
Operator
ENI
ENI
ENI
OGDCL
BHP Petroleum
Shell
TOTAL
Stratic Energy
KUFPEC / CNPCIT
CTKCPT
Mitra Energy
Mitra Energy
KEC
Hunt
TOTAL
Oil Search
KEC
29.
Country
Pakistan
Pakistan
Pakistan
Pakistan
Pakistan
Philippines
Sudan
Syria
Tunisia
Tunisia
Vietnam
Vietnam
Yemen
Yemen
Yemen
Yemen
Yemen
Block
Kirthar (Badhra Area B)
Kirthar (Bhit)
Tajjal (Kadanwari)
Qadirpur
Dadu (Zamzama)
SC-60
Block B
Block 17
North Kairouan
Sidi El Kilani
Block 19
Block 20
Block 15 (Mukalla)
Block 5 (Jannah)
Block 10 (East Shabwa)
Block 7
Block 74
Interest
(Unaudited)
6.00%
6.00%
15.789%
13.25%
9.375%
30.00%
27.50%
33.33%
50.00%
22.50%
40.00%
40.00%
45.00%
20.00%
14.2857%
20.25%
21.25%
31.
With reference to the contract referred to in note 30 (c) above, subject to the Varanus Island Force Majeure and the
HJV Force Majeure, the HJV continues to supply gas in accordance with the terms of the relevant contract. HJV
expects that based upon current proved reserves, it will be able to do so for a number of years.
Remarks
32.
STATEMENT OF COMPREHENSIVE INCOME
During 2009, an amount of KD 27,904 thousand representing foreign currency translation was credited to equity
(2008: a net amount of KD 6,050 thousand was debited) in accordance with International Financial Reporting
Standards which is consistent with the previous years. However, due to the introduction of IAS 1 (Revised 2007)
(See note 2), such foreign currency translation adjustments are now included in “other comprehensive income”
and shown separately in the “consolidated statement of changes in equity” and “consolidated statement of
comprehensive income”. In the previous years, this account was shown separately in the “consolidated statement of
changes in equity” as “net income / expenses recognized directly in equity” under the “foreign currency translation
adjustments” account. Although such amount is included in the “statement of comprehensive income”, it does not
form part of the profits eligible to be distributed as “dividends”.
SALES COMMITMENTS
33.
PROPOSED DIVIDENDS
The Board of Directors proposed to distribute cash dividends of KD 23,319 thousand for 2009 (2008: KD 24,174
thousand). This proposal is subject to the approval of the Annual General Assembly.
CAPITAL COMMITMENTS
Commitments under various joint ventures for future exploration and development expenditure at 31 December
2009 amounted to approximately KD 387 million (2008: KD 397 million).
30.
CONTINGENT LIABILITIES
a) Pursuant to the Group’s interest in a joint venture in Australia encompassing production from the Harriet Field
and various exploration permits, KUFPEC Australia Pty Ltd (“KAPL”) has entered into three deeds of cross
charge in favour of each of the other participants for the purpose of securing the Group’s obligations under the
Joint Venture Agreement. The cross charges comprise a prior ranking charge over the Group’s interest in the joint
venture to a limit of Australian Dollars 250 million (KD 48 million).
b) As a result of a pipeline explosion on Varanus Island, offshore North West Australia on 3 June 2008, KUFPEC
Australia Pty Ltd (“KAPL”) and its co-venturers (“the HJV”) have been prosecuted by the Western Australian
Department of Mines and Energy under Section 38 (b) of the Petroleum Pipelines Act 1969 (WA), for failing to
maintain the subject pipeline in good condition and repair. The maximum fine payable for the breach is 10,000
Australian Dollars which has been accounted in the consolidated statement of income. Delivery of gas by the
HJV was fully reinstated in August 2009. No legal actions have been commenced in respect of any potential
civil claims.
c) On 23 November 2006, KUFPEC Australia Pty Ltd (“KAPL”) issued a Notice of Force Majeure (“HJV Force
Majeure”) to a gas buyer of the Harriet Joint Venture (“HJV”). Three of the four limbs of the HJV Force Majeure
continue to be in force. Any claim in relation to any shortfall in gas supply under the relevant contract is subject
to the HJV Force Majeure and the HJV sellers’ limitation of liabilities set out in the contract.
56
57
Corporate Directory
HEAD OFFICE
P.O. Box 5291 Safat, 13053 KUWAIT
Telephone : (965) 1836000
Fax No. : (965) 24951818 - (965) 24920018
Email: abustan@kufpec.om
www.kufpec.com
SHAREHOLDER
Kuwait Petroleum Corporation
P.O. Box 26565 Safat, 13126 Kuwait
BANKERS
National Bank of Kuwait
P.O. Box 95 Safat, 13001 Kuwait
AREA OFFICES
AUSTRALIA
KUFPEC Australia Pty Ltd
1st Floor, 18 Richardson Street,West Perth, Western,
Australia, 6005 Australia
Tel: 61 8 9321 4499 - Fax: 61 8 9321 4717
Email: mail@kufpec.com.au
INDONESIA
KUFPEC Regional Ventures (Indonesia) Limited
Wisma GKBI, 15th Fl. Suite # 1502
Jl. Jend. Sudirman No. 28, Jakarta 10210, Indonesia
Tel.: (62-21) 5785 2784 (Hunting)
Fax: (62-61) 5785 2785
TUNISIA
KUFPEC Tunisia Ltd.
B.P. 158, Les Berges du Lac - Immeuble Sara, 3eme
Etage, Boulevard Principal
1053 Les Berges du Lac - Tunis
Tel.: 00216 71 965345 - Fax: 0021671 861441
PAKISTAN
KUFPEC Pakistan Holdings B.V.
House No. 2, Street No.71, Sector F-8/3, Islamabad
Pakistan
P.O. Box 2438, Islamabad, Pakistan
Tel.: +92 51 225 1530 - Fax: +92 51 2251 104
If you require further copies of this report, in either
Arabic or English, please provide a written request
to Public Relations at our Head Office, or through
any of our offices.
e-mail: abustan@kufpec.com
EGYPT
KUFPEC Egypt Limited (KEL)
44 Palestine Street, 10th Floor, New Maadi, Cairo 11435, Egypt, ARE
Tel.: 00202 27036272 - 27036275
Fax: 00202 27036289
Email: ssaafan@kufpec.com

Annual Report 2009

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