Iraqi Kurdistan oil sector curbs operations

14 August 2014

At least eight foreign companies take precautionary measures and relocate personnel as Kurdish army clashes with Isis militants

Several oil and gas companies in Iraqi Kurdistan have evacuated staff and suspended operations as Islamic State in Iraq and Syria (Isis) militants advance closer to the borders of the Kurdish Regional Government’s (KRG’s) territory.

The growing security crisis comes at a pivotal time for the KRG, which expects oil production in the region to more than double to 1 million barrels a day (b/d) by the end of 2015.

Companies taking precautionary measures in the region include US oil majors Chevron and ExxonMobil, Abu Dhabi National Energy Company (Taqa), Canadian groups Afren, Talisman Energy, Oryx and Western Zagros, and Turkey’s Genel Energy.

Precautionary measure

“Until now, the enemy has not been able to target oil operations in the region, but as a precautionary measure, some of the exploration activities in areas abutting potential combat zones have been temporarily halted and staff relocated,” the KRG’s Natural Resources Ministry said in a statement on 9 August.

While exploration and development will be reduced on several fields, the ministry said oil production remains unaffected and Erbil would continue oil exports via Ceyhan in Turkey.

The US military began air strikes against Isis militants on 7 August to defend civilians in northern Iraq as the militants overran towns inhabited by Christian and Yazidi minority groups in the northwestern Ninevah province.

Chevron, which is exploring in several blocks in Iraqi Kurdistan, said in a press statement that it is “closely monitoring the situation”.

“We have reviewed the business critical positions and as a consequence have made a reduction in the total numbers of expatriates in the region,” the company said.

Taqa, which is developing the Atrush field in the Dohuk province, suspended its operations and “significantly reduced staff levels” as a precautionary measure. The company said it still expects to start production as planned in 2015.

Reduced operations

Canada’s Oryx has reduced operations at its Hawler licence area in response to the increasing instability. In the western area of its licence, drilling operations at the Ain al-Safra and Banan sites have been temporarily suspended, with non-essential personnel relocated to Erbil.

“In the central portion of the Hawler licence 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,” Oryx said in a statement. “Production from the Demir Dagh field has also been shut-in.”

Afren, which has the capacity to produce about 6,000 b/d from the Barda Rash oil field 50 kilometres north of Erbil, has also taken precautionary measures.

“Afren has taken the precautionary step to temporarily suspend operations at the Barda Rash field in light of heightened regional security-related issues,” the firm said in a statement. “Working with local security advisers, Afren is implementing a phased withdrawal of non-essential field personnel from the field.”

Turkey’s Genel Energy, which is withdrawing non-essential personnel from non-producing assets, operates the Taq Taq and Tawke fields in Iraqi Kurdistan.

“Following recent events in the vicinity of the Kurdistan region of Iraq, Genel Energy can confirm that the Taq Taq and Tawke fields remain safe and secure,” the company said in a statement.

“Operations there are unaffected, with combined gross production from both fields averaging about 230,000 barrels of oil equivalent a day [boe/d] this week.”

Work suspended

Canada’s Western Zagros has reduced operations and withdrawn non-essential staff from its Garmian exploration block, including the suspension of the final stage of its Sarqala-1 workover well.

Talisman Energy, which holds the licence for the Kurdamir and Topkhana fields, has removed most of its personnel from the Kurdamir block, which it jointly operates with Western Zagros. The Canadian group says it still plans to sell some or all of its assets in Iraqi Kurdistan despite instability in the area.

The oil industry of northern Iraq outside of Iraqi Kurdistan has also been significantly affected by the conflict, with KRG and Isis forces both seizing control of crude assets around Kirkuk and Mosul respectively.

In mid-July, KRG forces seized the Bai Hassan and Kirkuk oil fields, which have a combined capacity of about 465,000 b/d, or about 80 per cent of crude capacity in non-KRG northern Iraq.

Meanwhile, according to state-run North Oil Company, Isis has seized the Ain Zalah and Butmah fields, which have a combined crude capacity of almost 20,000 b/d.

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