Kurdistan suspends DNO's oil operations
The authorities of Iraqi Kurdistan said yesterday they were suspending for six weeks the oilfield operations of Norwegian oil exploration firm DNO International.
The Kurdistan Regional Government said in a statement on its website that reports out of Norway had done it "unjustifiable and incalculable harm" but provided no further details.
It demanded DNO remedy the damage done to the KRG's reputation.
Shares in Norwegian oil producer DNO are likely to fall sharply when a trading suspension is lifted, analysts said, after Kurdish officials suspended DNO's Iraqi operations for six weeks.
The spat over the sale of 44 million DNO shares to the Kurdish Regional Government (KRG), which later ended up in the hands of a privately-held Turkish firm, risks costing DNO its licences in the semi-autonomous region and knocking investors' shaky confidence in Kurdish oil contracts.
The Oslo Stock Exchange (OSE) halted trading in DNO shares on Monday and trade will restart on Thursday morning at the request of DNO, which the stock exchange says asked for time "to clarify the situation in Iraq".
The KRG said it had suspended DNO's licences after an OSE statement and subsequent newspaper reports surrounding the share sale had done it "unjustifiable and incalculable harm".
Kurdish Energy Minister Ashti Hawrami said in a letter published on DNO's website that if DNO failed to remedy the damages it "may consider termination of DNO's involvement in the Kurdistan region with or without compensation".
The situation has highlighted the risks of doing business in the region, Al Stanton, oil analyst at RBC Capital Markets, said.
"It is unclear how the situation can be rectified," he said.
Shares in Kurdistan-focused peer Heritage Oil dropped more than four per cent before recovering to trade down 1.4 per cent at 1,052 pence, against a 1.7 per cent rise in the DJ Stoxx European oil and gas sector index.
Gulf Keystone Petroleum, which operates in Kurdistan, was down 7.3 per cent.
The dispute follows an OSE probe which accused DNO of not providing adequate information to the exchange and the market about the share sale last October.
DNO said on October 10 that it had sold the shares, which represented 4.8 per cent of the company, to raise funds, at a time when banks were reluctant to lend.
The shares were sold for NK4 (Dh2.4) each, raising $30 million (Dh110m). The shares closed that day at NK2.96.
DNO did not say who the purchaser was at the time because it was unaware of their identity, a company spokesman said yesterday.
In April, after DNO's share price had doubled, as Baghdad and the KRG made progress toward allowing the export of crude from the region into Iraq, DNO told the market it had been informed that Turkey's Genel Energy was the owner of the shares.
An OSE investigation concluded the KRG was the buyer of the shares in October and imposed a fine on DNO for not providing enough information on the sale.
DNO appealed the decision and the appeal committee agreed it had not breached its obligations in relation to market disclosure. However, the committee upheld the breach of obligation to release information to the exchange, DNO said.
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