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Oil output stable in Iraqi Kurdistan IS incursion

ARBIL, Iraq, Aug 9, (RTRS): Oil production from Iraqi Kurdistan remains unaffected despite an incursion by Islamic State militants along the autonomous region’s border, its Ministry of Natural Resources said in a statement on Saturday. The United States launched airstrikes in northern Iraq after Islamic State militants advanced to within a 30 minute drive from the regional capital Arbil, prompting oil companies in Kurdistan to withdraw staff and shut down some operations. “Oil production in the region remains unaffected, and is being delivered to both the domestic and export markets,” the statement said. “Indeed, the (regional government) is expecting that the producing companies will ramp up production in the coming weeks as ongoing export infrastructure improvements come online as planned.”

Total Kurdish production totaled about 360,000 barrels per day in June, according to the Paris-based International Energy Agency. About a third of that was exported, though Baghdad has been working to block sales outside its central system. Iraqi Kurdistan-focused companies’ shares have fallen as investors reappraise the autonomous region’s security. Some of the biggest oil operators in the region have lost almost a quarter of their market value this week.

Abu Dhabi National Energy Co (TAQA), the state-owned oil explorer and power supplier, suspended activity at the Atrush Block in Kurdistan on Saturday due to the instability. “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 statement said. London-listed Afren and Toronto-listed Oryx said on Friday they were cutting production at oilfields closest to the fighting. US oil major Chevron has also evacuated some staff from Kurdistan. An industry source said Exxon Mobil was doing the same.
 
Oil companies in Iraqi Kurdistan withdrew more staff on Friday as the United States launched air strikes to defend the regional capital Arbil from Islamic State militants and Britain told its citizens to leave.
Iraqi Kurdistan-focused shares have fallen as investors reassess what was previously viewed as a stable semi-atonomous region. Some of the biggest oil operators in the region have lost almost a quarter of their market value this week.
London-listed Afren and Toronto-listed Oryx said on Friday they were cutting production at oilfields closest to the fighting.
Genel, led by ex-BP CEO Tony Hayward and one of the biggest producers in Iraqi Kurdistan, said it was withdrawing “non-essential” workers but maintaining the combined 230,000 barrel per day output from its large Taq Taq and Tawke fields.
Marathon Oil Corp also said on Friday it was evacuating personnel from the region and all were safe.
Kurdish production totalled about 360,000 barrels per day in June, according to the Paris-based International Energy Agency. About a third of that was exported, though Baghdad has been working to block sales outside its central system.
Production has been cut by less than 5,000 barrels per day so far, according to company statements, but there are concerns that this could increase.
 
Advance
US military aircraft bombed Islamic State artillery attacking Kurdish positions southwest of Arbil, the Pentagon said, the first US air strike since the militants started their advance across northern Iraq in early June. The Eurasia Group consultancy said that while the strikes may help the Kurdish Regional Government defend major cities, energy infrastructure remains at great risk. “The fact that most energy assets are located in the western part of the Kurdish region, and therefore closer to ISIS (Islamic State) controlled regions, presents a sustained threat to these developments,” said Ayham Kamel, Eurasia’s Middle East and North Africa director. “Clashes with the Islamic State close to the Kalak refinery and the Kurmala-Fishkhabour oil export pipeline significantly increase risks to Kurdish energy infrastructure and potential expansion plans.”
 
The Kurmala pipeline carries crude from Genel’s Taq Taq field into the broader KRG pipeline system, though the field lies some 40 km (25 miles) to the southeast of Arbil. Genel’s Tawke field is close to the Turkish border, far north of the fighting. 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.
 
Sunni fighters from the Islamic State, an al-Qaeda offshoot bent on establishing a caliphate and eradicating unbelievers, have routed Kurdish troops in the past week to get within a half-hour drive of the prosperous capital Arbil. Britain told its citizens on Friday to leave Arbil and other parts of Iraqi Kurdistan close to the fighting warning the security situation could “deteriorate quickly”. Genel recouped some of an early decline after it reassured investors about its continued operations, but fell 2.3 percent and has lost 20 percent of its value since last Friday. Gulf Keystone Petroleum, another Kurdistan-focused oil producer, lost 2 percent, recovering from a 10 percent fall early in the session but down 24 percent since last Friday. The firm said it had increased security at its flagship Shaikan field, which lies more than 60 km (37 miles) northwest of Arbil, far from the fighting. It said production and trucking operations were continuing safely.
 
Afren fell 1 percent, while Oryx shares slipped 0.4 percent. 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 Iraqi Kurdistan continued to function normally. Oslo-listed oil producer DNO defied the trend, climbing 5 percent on the back of a technical buying rebound. In early trade on Thursday, DNO fell by as much as 24 percent as investors took fright. US oil major Chevron had already announced on Thursday they were evacuating some staff from Kurdistan. An industry source said Exxon Mobil was also evacuating. 
 
Meanwhile, the Kurdistan Regional Government’s (KRG) oil pipeline via Turkey is operating normally and pumping 120,000 barrels per day (bpd) of crude oil despite an advance by Islamic State fighters in northern Iraq, sources told Reuters on Friday. “The crude flow is uninterrupted, pumping around 120,000 bpd,” one industry source said. “Some fields such as Taq Taq are actually producing their highest.”
 
The Sunni militants extended their gains on Thursday, seizing more towns and strengthening their presence near the Kurdish region in an offensive that has alarmed Baghdad and regional powers.
Until this week, most of Kurdistan had been protected from militants by its own armed forces, called the peshmerga. Hundreds of thousands of Iraqis fleeing the Islamists, including Christians and Yazidis, have taken refuge in the Kurdish area. The KRG’s independent oil pipeline came online last December and connects with the Baghdad-controlled federal Kirkuk-Ceyhan oil pipeline on the Turkish side of the border, carrying Kurdish crude to the Mediterranean port of Ceyhan. The federal Kirkuk-Ceyhan pipeline carrying Kirkuk oil to Ceyhan has been down after consecutive attacks.
 
KRG shipped its first independent oil exports via Ceyhan to world markets in May, but has met strong objections from Baghdad and efforts to block its shipments as the central government sees itself as the sole authority on Iraqi oil. The latest tanker carrying 260,000 barrels of Kurdish oil left Ceyhan port on Sunday. Reuters photographs showed what appeared to be Islamic State fighters controlling a checkpoint at the border area of the Kurdish semi-autonomous region, little over 30 minutes’ drive from Arbil, a city of 1.5 million that is headquarters of the Kurdish regional government and many businesses. The fighters had raised the movement’s black flag over the guard post. However, a Kurdish security official denied that the militants were in control of the Khazer checkpoint. The regional government said its forces were advancing and would “defeat the terrorists”, urging people to stay calm.

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