A bitter row between the Kurdish Regional Government (KRG) and one of the biggest foreign oil companies operating in Iraq could trigger a fresh scramble for drilling rights in the oil-rich province.

British companies, including Heritage Oil, Gulf Keystone and Sterling Energy are among those best placed to benefit, industry insiders said.

On Monday, Kurdish officials suspended all the activities of DNO, a Norwegian oil producer, for six weeks after an investigation by the Oslo Stock Exchange suggested that the KRG had acted as middleman in a share sale by the company.

The Kurdish authorities have threatened to expel DNO from the semi-autonomous province, where in 2004 it became the first Western company to secure an Iraqi drilling licence after the toppling of Saddam Hussein the previous year.

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The six-week suspension includes a ban on DNOs current oil exports of 45,000 barrels per day from the Tawke oilfield.

The dispute centres on a Norwegian regulatory investigation into the sale of 5 per cent, or 43 million shares, of DNO last October. The inquiry suggested that Ashti Hawrami, the Kurdish Natural Resources Minister, had acted as a middleman a finding described by the KRG as causing unjustifiable and incalculable damage to its reputation. Norwegian press reports have claimed that either Mr Hawrami or the KRG had benefited from the deal to the tune of NKr100 million (10.5 million). The shares were sold on later to Genel Enerji, a Turkish rival of DNO.

Shares in DNO were suspended in Oslo on Monday pending clarification of the dispute, which has also prompted DNO to threaten to sue the Oslo Stock Exchange, which it says has damaged its commercial interests by breaching confidentiality rules.

From The Times September 24, 2009

British companies poised to cash in after Kurdish dispute with Norwegian oil producerRobin Pagnamenta Energy Editor 1 Comment
Recommend? (5) A bitter row between the Kurdish Regional Government (KRG) and one of the biggest foreign oil companies operating in Iraq could trigger a fresh scramble for drilling rights in the oil-rich province.

British companies, including Heritage Oil, Gulf Keystone and Sterling Energy are among those best placed to benefit, industry insiders said.

On Monday, Kurdish officials suspended all the activities of DNO, a Norwegian oil producer, for six weeks after an investigation by the Oslo Stock Exchange suggested that the KRG had acted as middleman in a share sale by the company.

The Kurdish authorities have threatened to expel DNO from the semi-autonomous province, where in 2004 it became the first Western company to secure an Iraqi drilling licence after the toppling of Saddam Hussein the previous year.

Related Links
Kurds suspend oil exports by Norwegian company
Iraqi deal opens way for sale of Kurdish oil
The six-week suspension includes a ban on DNOs current oil exports of 45,000 barrels per day from the Tawke oilfield.

The dispute centres on a Norwegian regulatory investigation into the sale of 5 per cent, or 43 million shares, of DNO last October. The inquiry suggested that Ashti Hawrami, the Kurdish Natural Resources Minister, had acted as a middleman a finding described by the KRG as causing unjustifiable and incalculable damage to its reputation. Norwegian press reports have claimed that either Mr Hawrami or the KRG had benefited from the deal to the tune of NKr100 million (10.5 million). The shares were sold on later to Genel Enerji, a Turkish rival of DNO.

Shares in DNO were suspended in Oslo on Monday pending clarification of the dispute, which has also prompted DNO to threaten to sue the Oslo Stock Exchange, which it says has damaged its commercial interests by breaching confidentiality rules.

The Oslo Stock Exchange insists that it was legally obliged to publish details of the investigation and has acted properly.

The dispute has highlighted the continued political risks of doing business in the Kurdish area of Iraq. However, Richard Griffith, oil and gas analyst at Evolution Securities, said that it could also open up opportunities for rivals, such as Genel, of Turkey, and the UK-listed companies Heritage Oil, Gulf Keystone and Sterling Energy that are already operating in the region.

If DNO is kicked out, then other companies like Genel would be in pole position to buy their assets in the region, he said.

Another oil industry source said if DNO was stripped of its Kurdish licences, they would be eagerly contested by other companies.

DNO holds some of the best licences in the Kurdish region, including a 55 per cent stake in the Tawke field, which has been producing 50,000 barrels of oil per day since the group was awarded Iraqs first oil export licence in June. It also holds 40 per cent stakes in two other exploration blocks.

Genel, which holds a 25 per cent stake in the Tawke field, is set to merge with Heritage Oil, a British company established by Tony Buckingham, a former mercenary, in a 3.4 billion deal that would create a Kurdish-focused company that would rank as one of the ten largest UK-listed oil companies.

The deal is subject to a Financial Services Authority investigation, but if it proceeds, the KRG is due to hold a 17 per cent stake in the combined group, giving it a vested interest in its commercial success.

Meanwhile, Sterling Energy is preparing to drill an exploration well in the Sangaw block.

Iraq holds the worlds thirdlargest proven oil reserves and the Kurdish region is believed to hold significant reserves that have yet to be discovered.

Rich pickings

45,000 Barrels a day exported by DNO from the Tawke oilfield

115bn Barrels of oil in Iraqs reserves

6m Barrels a day of oil production in Iraq hoped for by 2015, up from 2.5 million now

3.4bn Company to be created by the merger of Genel and Heritage Oil