Oil production at Iraqi Kurdistan's largest-producing oilfield is set to rise to as much as 140,000 b/d by the end of the month

Oil production at Iraqi Kurdistan's largest-producing field is set to rise to as much as 140,000 b/d by the end of August despite the Islamic State’s advances into the region, the General Manager of Taq Taq Operating Company (TTOPCO), Onder Tekeli, said on 15 August.

Taq Taq Oil Field is jointly owned by the KRG (20%) and TTOPCO (80%) which is a joint venture between the Anglo-Turkish Genel Energy (55%) and Sinopec’s Addax Petroleum (45%) subsidiary. Tekeli stated "We have a target to ramp up production towards 140,000 b/d and I believe we would achieve this by the end of the month."

Radical Sunni militants of the Islamic State last week advanced to within a half hour's drive of Erbil, the capital of Iraq's Kurdish region and a hub for IOCs, before U.S. military air strikes thwarted their advance.

Several IOCs, including ExxonMobil and Chevron, operating in the previously stable Kurdish controlled region have evacuated all non-essential staff while other smaller producers, such as Afren and Taqa, have suspended operations, as reported here on 11 August.

In spite of KRG-based IOCs seeing their shares fluctuate, in a manner reflecting the Kurdish forces as they retreat and regain ground, there has been little impact on the overall oil output of the region. According to company estimates, production has only been cut by 5,000 b/d, although fighting between Kurdish Peshmerga forces and Islamic State fighters in the environs of Erbil have kept firms and investors on edge.

Currently unaffected by the Islamic State’s advances, however, Tekeli insists that morale at the Taq Taq oil field, 40km (25 miles) southeast of Erbil, remains high: "The worries started about the IS (Islamic State) fighters when they attacked the Makhmour camp. But we have not stopped working and our local staffers have expressed their commitment to us.”  Makhmour to the southwest of Erbil was the closes the fighting got to the capital last week.

Ozan Guler, production superintendent, stated that in order to increase Taq Taq oil field production beyond 140,000 bpd TTOPCO will set up three well-site production facilities to boost output: "We already have the potential to boost production up to 140,000 b/dd in our wells ... We will be setting up these new facilities whose start-up period is about 10 days."

Genel Energy, which operates the Taq Taq and Tawke oilfields in Kurdistan, has said it has evacuated non-core personnel from fields that are not producing oil. Last week it said that production was still ongoing at the two fields and it was averaging a combined 230,000 b/d.

Genel's shares fell by almost a quarter in early August as Islamic State forces advanced towards Erbil, but have since rebounded by around 12%.

At the end of trading, 15 August, they were up almost 2% at £824 (US$1,378.10). Although the rebound has slowed, Genel's shares are currently up 0.5% at £829.50 (US$1386.97).

(£1 = US$1.67).

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

© 2014 Menas Associates

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

Iraq: Bitter-sweet developments for KRG as US Judge rules that US$100 million oil dispute should be settled in Iraq

On 29 July we reported that a US judge, in response to a lawsuit filed by the Baghdad government, had signed an order to seize the US$100 million crude oil cargo from the United Kalavrvta tanker anchored off the Texan coast. It now appears that there have been some bitter-sweet developments for the KRG.

While US Magistrate Nancy Johnson issued an order to seize the tanker’s cargo, she also told lawyers for Iraq that the dispute should be resolved through the Iraqi court system. As the tanker is anchored 60 miles offshore, 50 miles outside of federal jurisdiction, the cargo cannot be seized.

Although the inability to seize the tanker’s US$100 million cargo is an obvious plus for the KRG it has come at a heavy price. Prior to the seizure order the KRG had managed to keep the end-buyers of its oil anonymous. However, the main US customer for the cargo has now been named as Lyondell Basell, who has subsequently stated that it would not take it, or any subsequent shipments, until the matter had been resolved by Erbil and Baghdad.  

The filing in federal court, Houston, stated that Iraq's central government has asked Iraq's Federal Supreme Court to block the Kurdistan Regional Government from exporting any crude until its ownership can be determined. The central government contends that the oil is not the sole property of the Kurdistan region of Iraq but belongs to the country as a whole. The KRG, however, asserts that its independent oil sales are their efforts to recoup the funds allocated to it, which the Iraqi central government has failed to supply them with.

The latest legal challenge follows Iraq’s bringing of criminal charges against the Kurdistan government in May, alleging theft of oil revenues. However, Kurdistan has failed to appear in court to address the charges and this "failure to comply with the summonses has effectively blocked the Federal Supreme Court from hearing the merits of the case." Harold Watson, a Houston lawyer representing Kurdistan, did not have an immediate comment on the filing when contacted by Reuters.

The U.S. government has expressed fears that independent oil sales from Kurdistan could contribute to the breakup of Iraq as the government in Baghdad struggles to contain the ultra-hardline Islamic State, a group of Sunni Islamist insurgents who have captured vast areas of the country.

Washington has pressured companies and governments not to buy crude from the KRG, but it has stopped short of banning U.S. firms from buying it outright.

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

© 2014 Menas Associates

Libya: In-fighting between Islamist militias in Derna

Besides the ongoing fighting in Tripoli and Benghazi another flashpoint has emerged in the eastern coastal town of Derna. Unlike the current conflict in Libya’s two largest cities the clashes in Derna are between rival militant Islamist groups rather than between mainstream Islamist and liberals. A major battle has developed between two main groups: the Abu Slim Martyrs Brigade and the Majlis Shura Shabab Al-Islam fi Derna (the Shura Council of the Youth of Islam in Derna) and its allies.

This battle is mainly one for control over the town but there are also distinct differences of ideological approach. The Abu Slim Martyrs Brigade was formed during the revolution and comprises mainly former members of the Libyan Islamic Fighting Group (LIFG). Its cadres were formed during the era when national militant movements emerged out of the Afghanistan war of the 1970s and returned home to challenge authoritarian regimes.

The Majlis Shura Shabab Al-Islam fi Derna is completely different. Formed very recently, its members are generally young and aspire to more transnational jihadist ideologies and movements. The group reportedly includes a number of young Libyans who returned from fighting in Syria, Mali and Algeria.

These militant groups have become increasingly embroiled in a tit-for-tat battle of killings and revenge killings that have seen some key commanders on both sides assassinated.

Meanwhile some of the groups that are affiliated with the Majlis Shura Shabab Al-Islam fi Derna are now declaring their allegiance to ISIS forces in Iraq and Syria. This includes the recently emerged Al-Bata’a Brigade and the Abu Mahjan Al-Ta’ifi Brigade, whose emir declared his support for Abu Bakr Al-Baghdadi, the head of ISIS, after he declared a caliphate in Iraq and Syria. As a symbol of this support a group of 50 mujahedeen, including fighters, doctors and oil engineers, was sent to Iraq to support the cause. The 50 also included a number of jihadists who are willing to sacrifice themselves as suicide bombers.

That these brigades and groups are allying themselves with ISIS is a worrying development which brings a whole new dimension to the militancy that has implanted itself in Derna and elsewhere in the country.

For further analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2014 Menas Associates

More than 150 Syrian students kidnapped by ISIS

The Islamic State of Iraq and Sham (ISIS) has allegedly abducted between 153 and 186 boys aged 13-16 in the Aleppo region of northern Syria. Although largely unreported by conventional media outlets, bar brief reports in The Guardian and VICE News, it appears that ISIS has perhaps been influenced by Boko Haram’s April kidnapping of more than 300 schoolgirls from Chibok in north-east Nigeria.

Reports have recently surfaced that on 29 May 2014 a convoy of ten minibuses successfully completed the perilous 110 km journey from Ain al-`Arab (Kobani in Kurdish), on the Turkish border, to Aleppo to sit their end-of-year-exams as required by Syria’s educational system. The returning convoy was intercepted and redirected to an ISIS-controlled Islamic school in Minbej, just 66 km from Kobani, where the vast majority of the boys have remained. The primary source of what has been reported is Mustafa Hussan, one of five boys who managed to escape four days after the initial abduction. 

Hussan reports that, although the food was good, many boys were beaten by their international ISIS captors: ‘I saw a lot of Russians, Chechens, Libyans, some Saudi Arabians and Syrians too.’ Forced to undergo lessons in Islamic Shar’ia ideology and training in jihad, the boys were threatened with beheading if they attempted to escape. In spite of this, Hussan and four fellow students managed to escape via a roof under the pretence of raising a flag while their classmates distracted their religious teacher. Hassan stated that once they had escaped they were aided in their journey home by sympathetic locals.

Since their escape, unconfirmed rumours have surfaced that a further 15 students were traded for three ISIS combatants being held by Kurdish forces. What is certain, however, is that the longer the situation remains, the more difficult it will be to extract the students. Turkey’s Kurdistan Workers’ Party (PKK) has pledged its support to Kobani but the situation is complicated by the fact that ISIS has been carrying out deadly attacks on the city and surrounding villages since 2 July with weapons captured in Mosul. One attack, at Sheyoh, saw the execution of 24 Kurds, including two children.

Within the majority Kurdish city there is little faith that anyone outside of Kobani will help. According to a 2013 estimate by the Syrian Central Bureau of Statistics (CBS), over 85% of the total population of 44, 821 is Kurdish, with small Arab (5%), Turkomen ( 5%) and Armenian (1%) minorities.  The city itself is accustomed to both violence and its status as a minority stronghold. Founded in 1915 by Armenians fleeing genocide in Anatolia, who mostly emigrated to the Soviet Union in the 1960s, part of the city fell foul of the demarcation of the Syrian and Turkish border and has been assimilated into the Turkish city of Suruç. 

The vast majority of Kurds, following the principal of “my enemy’s enemy is my friend”, supported Syria’s minority Shi’a Alawite regime, believing that if the country were governed by the majority Sunni populace the Kurds would themselves be further ostracised and persecuted. In addition to what is taking place in the Kurdistan region of Iraq, which is proving a stumbling block to ISIS’ unrealistic attempts to form an Islamic Caliphate stretching from the Gulf to the Atlantic, the Syrian Kurdish allegiance to the regime has seen them become a target for sustained siege and, now, kidnapping and executions.

While the precise facts of what has happened remain unverified, what has crystallised is ISIS’ willingness to kidnap and enlist children in armed conflict, considered war crimes under International Humanitarian Law, to achieve its aims.

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

© 2014 Menas Associates

IN DEPTH: Can Al-Maliki survive?

Despite his characteristic resilience, can Prime Minister Nouri Al-Maliki survive the unfolding crisis in Iraq? In the first week of the crisis Al-Maliki appeared lost and unable to comprehend the political ramifications of ISIS's advances and seemed to have been written off by almost every side. It therefore seemed all but inevitable that the beleaguered premier would have to concede defeat and step down.

In typical style, however, he pulled himself together quickly enough and since then has been on the offensive. Al-Maliki is fighting back hard, something that will have won him further support and respect among some Iraqi Shi’as, many of whom believe that, rather than being the root of the problem, Al-Maliki is the man to protect them from what they see as a sectarian onslaught by the Sunnis and by terrorist forces. 

One should not forget that Al-Maliki still has the support of large swathes of the Shi’a population. His State of Law Alliance took the largest number of votes in the last elections and Al-Maliki himself won 720,000 votes, the largest share of any single candidate. For all that he may be despised and accused of being authoritarian and sectarian, Al-Maliki is still the strongman of the Iraqi political scene. 

All this makes it very difficult for the other political players to force him out. This includes his Shi’a rivals. That is not to say that they haven’t been trying. The Sadrists and to a slightly lesser degree the Islamic Supreme Council of Iraq (ISCI), are insisting on Al-Maliki’s departure, even going so far as to nominate alternative candidates for the premiership. At the end of June both blocs proposed Adel Abdulmehdi, the current deputy president, as their chosen candidate. 

Yet their efforts alone are unlikely to unseat Al-Maliki, who is not relying on either the Sadrists or ISCI for his third term. Aware that they were not going to give him a chance, he left both behind weeks ago, deciding instead to focus on forging alliances with other factions, including some Sunnis. It was through such alliances that Al-Maliki succeeded in getting the support of 165 MPs from a range of parties and currents outside the National Alliance. 

Thus for all that these big Shi’a players may be pushing for Al-Maliki’s departure they have little real influence over whether he stays or goes. 

Instead, Al-Maliki’s survival depends more on whether the State of Law Alliance and those smaller political forces that have thrown their weight behind him will continue to back him. There has been a lot of talk that key components inside the State of Law Alliance are ready to drop Al-Maliki. There have also been reports that the alliance is considering putting forward alternative candidates for the prime minister’s post. 

Among the names being circulated are Al-Maliki’s adviser Tariq Najm; deputy prime minister with responsibility for energy affairs Hussain Al-Shahrastani; deputy president Khodeir Khozei; transport minister and head of the Al-Badr Organisation, Hadi Al-Ameri; and national security adviser Faleh Al-Fayed. Notably, none of these individuals are from Al-Maliki’s Al-Dawa party, which had a weaker showing in the elections than many other components of the State of Law Alliance. 

Despite this talk, however, as yet there are no concrete signs that the alliance is about to crack or that it has any intention of withdrawing its support for Al-Maliki. This is perhaps unsurprising. State of Law is Al-Maliki’s creation and was built around him. Although there are other important figures within it, he is still the glue that holds it together and that enables it to attract so much public support. Thus abandoning Al-Maliki will not be that easy. That does not mean that they won’t do it. Much will depend on how much pressure the alliance comes under from other Shi’a parties, from other parts of the political establishment and from external forces, including Iran and the US – Washington clearly doesn’t want Al-Maliki to continue. 

As to whether those MPs from outside his alliance that Al-Maliki managed to win over will stick by him now this crisis has erupted, this is a more questionable matter. This is especially the case for those Sunni elements that Al-Maliki managed to pick off and bring over to his side, who may be persuaded to retract if they see that things are not going the prime minister’s way. Some of these elements might well falter if they see that the tide has turned against Al-Maliki and that the only way forward is to force him out of power. 

Al-Maliki’s days may well be numbered and without such support he will have no chance of holding on.

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