UK-listed Genel Energy has suffered a new setback in developing its gas assets in Iraq's Kurdistan region or Iraq.

The company and the Kurdistan Regional Government (KRG) have shelved existing plans for the development of the long-delayed Bina Bawi concession in Iraq’s autonomous region and are working on a new gas lifting agreement (GLA) to monetise its gas and oil reserves.

"Having reached agreement that the existing GLA does not reflect the commercial realities of the proposed development, Genel and the KRG ... have jointly agreed to let the GLA lapse on 30 April 2019 and focus on negotiating updated commercial terms based on a staged and integrated oil and gas development.

"The parties are progressing the negotiation of a project scope based on a phased approach and ramp up of the gas development, with an initial phase of 250 MMscfd (million standard cubic feet of gas a day) raw gas capacity, and an accelerated development of the oil scope, where the KRG and Genel will jointly fund the first phase gas development utilising the revenue from Bina Bawi oil," Genel said.

The two sides now have a year to finalise the new agreement. Genel will lose its rights to the concession if no deal is reached by 30 April 2020.

"In line with our capital allocation strategy, the company will only proceed with significant investment in Bina Bawi once an agreement is reached on a commercial framework that provides a clear route to monetisation," Genel said.

Genel booked an impairment of $424 million on its Miran gas licence in March and handed over the field to the KRG after failing to carry out a field development plan. Both Miran and Bina Bawi are geologically complex fields with high sulphur content which makes development costly.

Genel has said the Miran and Bina Bawi deposits hold 14.8 trillion cubic feet of contingent gas resources which could satisfy growing local demand with the excess being exported to Turkey.

However, the company has failed to find farm-in partners to help with development costs and marketing the gas in the absence of a distribution network.

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Genel shelves Bina Bawi plans