DNO's Iraqi Tawke Oilfield Output Increase Delayed

Source: Reuters 10/15/2014, Location: Middle East

Norway's DNO said the departure of contractors from its Tawke oilfield in Iraqi Kurdistan had delayed the push to increase its output capacity, although a new pipeline link would be finished this year

DNO, which operates Tawke, said the new pipeline would connect the field to an export terminal, boosting its ability to export via Turkey, even though its plan for production capacity of 200,000 barrels per day this year would be delayed.

"We believe the update on the potential delay of production capacity probably is the most important update for the market," Swedbank said in a note to clients. "...the update could trigger some negative estimate change for consensus."

DNO shares closed 6.08 percent lower on Wednesday on the delay, a broad selloff in oil and gas shares and a force majeure on some of its operations in Yemen. The European oil and gas index was down 2.45 percent at 1433 GMT.

DNO exports crude via Turkey and was investing in big production growth but many of its contractors abandoned Iraqi Kurdistan this year after a flare up in fighting, delaying the ramp up in the Tawke project.

Until earlier this year DNO was only able to sell its Iraqi Kurdish oil locally, well below global prices, but the export link via Turkey allowed it to ship its crude on a broader market.

DNO said that exports of Tawke oil via Turkey by the Kurdistan Regional Government (KRG) for its own account are averaging around 90,000 barrels per day while sales in the local market are around 20,000 barrels per day.

The KRG started exporting oil via Ceyhan in May despite opposition from Baghdad, which decries sales not managed by the central government as illegal. The KRG says they are allowed under the constitution.

The company also said it declared force majeure in Yemen, and has stopped drilling activities and development of previous discoveries, but the firm's production there was stable at 7,000 barrels per day, it said in the statement.

DNO declared the force majeure amid increased insecurity in the country. The capture of capital Sanaa on Sept. 21 by rebels stunned Yemenis, whose country has been gripped by political turmoil since mass protests in 2011 forced its long-serving president, Ali Abdullah Saleh, to step down.

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