By William MacNamara and Delphine Strauss
FT - Heritage Oil and Genel Energy announced their merger on Tuesday, creating an Anglo-Turkish oil company esimated to be worth up to $6bn that would be the largest investor and developer in the burgeoning oil region of Iraqi Kurdistan.

Heritage plans to issue 260m new shares to Genel, a subsidiary of Turkey's privately held Cukurova conglomerate, in exchange for Genel's business. Genel will own half of the new London-listed company, to be called HeritaGE Oil.

However the final deal is dependent on Heritage and Genel settling an existing liability of $1.1bn with the Kurdistan Regional Government linked to developing local infrastructure projects, which was to be funded from Genel's future profits.

While $605m of the liability is to be settled by Cukurova, the remaining $495m remains a long-term liability of the new group, payable out of future revenues.

"We're in discussions with them right now on a number of options," said Paul Atherton, chief financial officer of Heritage. "It could be that they have a greater equity participation or it could involve changing the consideration metric. The number of [planned] shares could be reduced."

In an indication of the untapped oil wealth in Iraq's autonomous region of Kurdistan, Heritage said last month that one half of its Miran field could hold more than 4bn barrels of oil alone. The enlarged group to have estimated proved and probable reserves of approximately 300m barrels of oil.

"This will transform Heritage," said Mr Atherton. "This could be a big regional player."

He said the deal valued Genel at between $3.3-$3.6bn (£2-£2.2bn) while Heritage has a market capitalisation of $2.4bn (£1.5bn). Heritage shares, which were suspended last week pending an announcement, opened up 7p at 592p, valuing the group's shares at £1.5bn.

Tony Buckingham, chief executive of Heritage, will become executive chairman of the new group while Mehmet Sepil, chief executive of Genel will be HeritaGE's new chief executive. Mehmet Emin Karamehmet, chairman of the Cukurova Group, will become an executive director of the new group while Mr Atherton will remain as chief financial officer.

Along with its joint venture partner Tullow Oil, Heritage has struck an oil bonanza in western Uganda around Lake Albert.

Kurdistan and Uganda require significant investment in infrastructure to become oil exporters.

Genel, which specialises in civil engineering and has the financial backing of one of Turkey's biggest companies, would provide that infrastructural investment.

The investment would start by building a spur pipeline to Kurdistan's rich Taq Taq field, where Genel owns part of a licence.

Taq Taq was one of two fields in Kurdistan that entered production on June 1. The official start of oil exports from the Taq Taq and Tawke fields ended years of political impasse between Iraq's central government and the Kurdistan regional government about how Kurdistan's oil would be developed and sold.

Heritage and Genel hope revenues from Kurdistan oil exports will finance a 1,300km pipeline linking Heritage's Ugandan fields to Kenya's coast. Such a pipeline is key to the Uganda fields' commerciality.

The deal will require approval from a majority of Heritage's shareholders as it qualifies as a reverse takeover under UK listing rules.

The Financial Times