London (Platts)--2Oct2007

Canadian independent Heritage Oil has become the second North American
company in two months to enter into a production sharing contract with the
Kurdistan Regional Government in Iraq following approval in August of
Kurdistan's own Oil and Gas Law.

     Heritage announced Tuesday a PSC to explore in the Miran block in
southwest Kurdistan following the signing of a PSC by the US' Hunt Oil in
September.

     The Hunt deal, covering the Duhuk area of Kurdistan, was called "illegal"
by the Iraqi Oil Minister Hussein al-Shahristani, who claimed all oil and gas
upstream contracts in the country have to be approved by the federal
government before they are legal.

     This latest deal with Heritage is likely to further antagonize Baghdad,
whose own oil and gas law is still yet to be discussed in the country's
parliament after lengthy delays.

     Heritage, in a statement, estimated reserve potential in numerous zones
in the Miran block at more than 1 billion barrels of oil. Geological work is
to start immediately, with a "high-impact" exploration drilling program in
2008, Heritage said.

     Heritage said it would also be the operator and the 50:50 partner with
the Kurdish government in the construction of a 20,000 b/d oil refinery in the
vicinity of the license area.

     The total contractual financial commitment for the Miran license is
estimated to be less than $40 million distributed over the first five-year
term, which can be extended for a further two years thereafter, Heritage said.

     The exploration license is to automatically convert into a development
license upon commercial discovery.

     Heritage CEO Tony Buckingham said he hoped the Miran block would become a
"world-class asset." 

     "We consider this license to be one of the most prospective blocks in
this, until now, under-explored region, with billion barrel oil potential," he
said.

     "This license can become a world-class asset which would generate
significant additional shareholder value for Heritage," he added.

     Hunt's, and now Heritage's, direct dealings with the Kurdistan
authorities are thought to signal a degree of frustration among some private
companies with the slow pace of getting an oil law passed by Iraq's
parliament.

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