Iraq: IOCs in Kurdistan region see shares retreat as non-essential staff evacuated

The apparent stability and growing prosperity of Iraq’s more liberal and pro-business Kurdistan region has been undermined in recent weeks as Islamic State insurgents make significant advances into the Kurdish-controlled region. IOCs that were previously unaffected by the growing violence elsewhere in Iraq, are now seeing their share prices retreat in a manner reflecting those of the Kurdish forces.

Genel Energy, one of the IOC’s reaping the benefit of the export pipeline to Ceyhan in Turkey, has seen its shares shed 17% since the start of the month. London-listed Gulf Keystone Petroleum put out a statement on 7 August confirming that its production and trucking operations at its giant Shaikan field “remain safe and secure”, but this did little to prevent its shares falling by more than 11%. Norway’s DNO - , which has exploration, development and production interests in Kurdistan - was also hit, with its shares sliding 9.5%.

Following the lead of Chevron, ExxonMobil, Afren and Taqa, these companies, as well as Hess and its partner Petroceltic, have suspended operations in the  Kurdistan region and started to evacuate non-essential staff amid spreading violence in the region.

Last week Kurdish forces lost several  towns to Islamic State displacing 150,000 people largely from the Yazidi religious minority to according to a UN estimate. 

Considered to be ‘devil worshippers’ by the Islamic State, the Yazidis pray five times a day to the Malek Taus, the Peacock Angel also known as Shaytoun in the Kurdish language. Unfortunately, Shaytoun also means ‘devil’ in Arabic. The Islamic State has been accused of issuing an ultimatum to the Yazidi community to convert to Islam or face death, and reports from refugees state that these threats have been enacted through beheadings. 

The Kurdistan Regional Government has sent its Peshmerga forces to tackle the threat and the US has started air strikes, however, resulting in the recapture of two towns from Sunni militants on 10 August, one of the first victories for a military force that until now has been in retreat.

In a statement released 11 August, Petroceltic said “In conjunction with Hess Middle East New Ventures, our partner and the operator of our exploration activities in the Kurdistan Region of Iraq, we have been closely monitoring recent events in the region. While these developments have not directly impacted our exploration activities to date, in line with other operators in the region, it has been decided, as a precautionary measure, to temporarily secure and suspend operations (including the drilling of Shireen-1 exploration well in the Dinarta licence) and to evacuate non-essential personnel”.

Hess operates Iraqi Kurdistan's Dinarta and Shakrok fields, in which Petroceltic and the Kurdistan Regional Government have stakes of 16% and 20% respectively. The partners started drilling their first well, Shireen-1, on the Dinarta block in June and had expected exploration work to last five months. However, they decided to plug and abandon the Shakrok-1 well after disappointing exploration results.

Oryx Petroleum announced on 8 August that it had implemented a number of precautionary measures to protect its employees from the security developments in the region.  In the western portion of the Hawler license area the drilling operations at the Ain Al Safra and Banan sites have been temporarily suspended, both sites secured, and non-essential personnel relocated to Erbil given the proximity of such locations to recently reported hostilities in northern Iraq. 

In the central portion of the Hawler license area, drilling operations and facilities construction at the Demir Dagh field remain secure and operational but continue at reduced levels primarily due to the departure of certain third-party service company personnel from the site. Production from the Demir Dagh field has also been shut-in. 

The situation is moving fast in Iraq and with no sign of any easy solution to the advance of the Islamic State, which now controls parts of Syria and Iraq, including key oilfields that are funding the militants, investors should stay wary.

For more news and expert analysis about Iraq, please see Iraq Focus.

© 2014 Menas Associates

IOCs evacuate staff from Libya

Italian energy giant, ENI, has responded to the escalating violence in the capital by moving fifteen members of its staff out of Tripoli. The employees were moved to the offshore Bouri oilfield before being whisked away to Malta and onto Italy.

French company Total has also moved its staff out of the capital, getting them out of the country by road to Tunisia. The United Nations has also pulled its remaining staff out of the country. 

Following the abduction and beheading of a Filipino construction worker on 15 July, the Philippines government ordered its estimated 13,000 nationals in Libya to leave the country, instructing them to contact the embassy in Tripoli for instructions on "mass evacuation."

Yet how such evacuations are going to take place while the airport is out of action and with little prospect of its restarting operations any time soon is unclear. 

Although the airport at Zawara is preparing to take both domestic and international flights, it is still going to take several days before it is in a position to do so. It also still requires the agreement and support of the Ministry of Transport and the Civil Aviation Authority. More importantly there are still question marks over safety and insurance issues.  

Meanwhile there are growing fears about evacuation by road given that the confrontation has now spilled beyond the airport area and out to Janzour. 

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2014 Menas Associates