Militant advance disrupts Iraq oil production

Last updated 00:20 09/08/2014

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Oil companies in Iraqi Kurdistan began to withdraw more staff on Friday as Islamic State militants closed in on the regional capital, with Afren becoming the first to announce it was cutting production.

Shares of London-listed oil firms active in northern Iraq fell for a second day as other field closures and staff evacuations became more likely in a region seen until now as relatively secure compared to the rest of the country.

The Islamic State considers non-Muslims and adherents to Shi'ite Islam as apostates, and in many towns it has captured it has made a stark offer: convert, flee, or die.

They have advanced to little over a half-hour drive from Arbil, a city of 1.5 million that is headquarters of the Kurdish regional government and the local branches of many international businesses.

"Afren has taken the precautionary step to temporarily suspend operations at the Barda Rash field," the company said, adding it was withdrawing all non-essential staff from the field.

Genel Energy, operator of the two large Taq Taq and Tawke oilfields in Kurdistan, said it evacuated non-core personnel from fields in the region that are not producing oil.

Taq Taq and Tawke are still operating, it said, and have been producing an average of 230,000 barrels per day (bpd) this week.

Genel recouped some of an early decline after it reassured investors about its continuing operations, but it remained almost 3 percent down on the day and has lost 20 percent of its value since last Friday.

Afren fell 4.5 percent, while Gulf Keystone Petroleum, another Kurdistan-focused oil producer, was down 6.2 percent, although both narrowed those declines later in the session.

Oslo-listed oil producer DNO defied the trend, leaping 8 percent on the back of a technical buying rebound. In early trading on Thursday, DNO had fallen by as much as 24 percent as investors took fright.

"(Afren's oilfield closure) underlines the severity of the security situation in Kurdistan and the potential risks for those operating in the region," said analysts at Maribaud Securities.

U.S. oil majors Chevron had already announced on Thursday they were evacuating some staff from Kurdistan. An industry source said Exxon Mobil was also evacuating.

Gulf Keystone has increased security at its flagship Shaikan field but said production and trucking operations were continuing safely.

The Kurdistan Regional Government's oil pipeline through which it has been pumping oil to Turkey since December was operating normally on Friday, flowing 120,000 bpd of oil, industry sources told Reuters.

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Barda Rash, Afren's only producing oil asset in Iraqi Kurdistan, is 60 percent owned by the company. It was producing a gross average of 785 bpd of oil in the first quarter, making it a relatively small field.

Afren's other operations in Kurdistan continued to function normally but the company said it was closely monitoring events. It said the Barda Rash suspension was not expected to have a significant impact on its cashflow.

U.S. President Barack Obama said on Thursday he had authorised limited U.S. airstrikes to blunt the onslaught of the militants, which has heightened international fears of a humanitarian catastrophe.

Tens of thousands of members of Iraq's minority Yazidi sect have been driven from their homes and are stranded on Sinjar mountain.

- Reuters

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