Thursday, October 8, 2009

Norwegian Company Has Final Word In Kurdish Oil Scandal

On September 21, 2009 the story broke that the Oslo Stock Exchange was investigating a questionable stock sale of shares of the Norwegian DNO oil company involving the Kurdistan Regional Government’s (KRG) Natural Resource Minister. The Minister acted as a middleman in a transaction where Turkey’s Genel Enerji bought $29.7 million worth of shares of DNO in October 2008. The KRG immediately accused DNO and the Stock Exchange of slandering its reputation, by implying that the Resource Minister had acted improperly in the transaction. DNO’s work in Kurdistan was suspended, and they were given an ultimatum to repair the KRG’s image. By October 6, the matter was cleared as DNO was fined for not disclosing all of the particulars about the deal, and the KRG was informed that they were never part of the investigation. DNO was then allowed to continue work at the Tawke field, one of two that are exporting oil from the Kurdish region.

It now appears that the Norwegian company got the last word in the controversy. DNO sent two letters to the KRG on October 5 to apologize. At the end of one of them the company said that it would suspend all of its exports of petroleum, and focus upon domestic production for Kurdistan. In June 2009, the KRG announced that it was to begin selling oil from the Tawke and Taq Taq fields internationally. The Oil Ministry eventually agreed, with the profits being deposited in an account in Baghdad, but there was one major problem. The central government refused to pay the companies, leaving the matter to the Kurds. DNO, and two other companies working on the fields have been pumping oil for the last four months with no compensation. They had been waiting patiently for some kind of payment plan to be worked out between Baghdad and the KRG, but nothing happened as the two sides are deeply divided over who has control over oil deals. In fact, as reported before, the companies could wait years for any money. The KRG’s over reaction to the Oslo Stock Exchange’s investigation seems to have been the last straw for DNO. Petroleum exports from Kurdistan was a symbolic victory for the KRG, but now it is losing one of the two fields involved in this endeavor over a matter that blew over in just a few days. The Resource Minister’s reactions might have also damaged the business environment in Kurdistan as companies must now be worried that their operations could be suddenly closed if they offend any high government official.

SOURCES

Lando, Ben, “DNO’s Iraq operations suspended,” Iraq Oil Report, 9/22/09

Macdougall, Ian, “Norwegian oil company reinstated in Iraq,” Associated Press, 10/6/09

MacNamara, William, “Kurdish oil drama reaches breaking point,” Energy Source, Financial Times, 10/7/09

Reuters, “UPDATE 1-Iraqi Kurdistan suspends DNO’s oil operations,” 9/21/09

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