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Norway's DNO plans Iraq oil output start in 2007
By James Kilner
Reuters
Yemen
Petroleumworld.com 04 12 06Norwegian independent oil company DNO plans to start producing oil in Iraq next year, it said yesterday, a move that would make it the first Western firm to do so since the 2003 US-led invasion.
Iraq holds the world's third largest oil reserves and the United States and its allies consider ramping up exports crucial to kickstarting the economy.
But insurgency sabotages and power vacuums at the state oil company and ministry have slowed exports and in January they dropped to nearly half the level they were under Saddam Hussein.
"Based on the results to date and contingent on (a) successful outcome of the well tests, first test production of oil from the Tawke Area could commence (in the) first quarter 2007," DNO said in a statement.
Data gathered so far showed oil in five reservoirs in the Tawke area in the Kurdish north of Iraq, it said, although DNO chief executive officer Helge Eide told Reuters it was too early to say how big the field is. "It's too early to say anything about the size. We need more test results," Mr Eide said.
Shares in the Oslo-based company - which already produces a small amount of oil in the North Sea and in Yemen and has prospects in Equatorial Guinea and Mozambique - jumped over 13 per cent on the news to a two-month high of 56 crowns. By 1100 GMT DNO shares had eased slightly to 54.50 crowns, still a 10.8 per cent increase from Friday's close. This values the company at around 12.2 billion Norwegian crowns ($1.87 billion). DNO signed a deal directly with the Kurds to explore for oil in northern Iraq, bypassing central government. In January DNO's share price fell after it seemed Baghdad would contest the deal.
But Mr Eide said he thought differences would be smoothed out.
"We have a good dialogue and support from the oil ministry in Baghdad," he said.
The situation is further complicated, analysts say, as DNO signed the deal in 2004 - a year before Iraq adopted a new Constitution.
"The Iraqi constitution is ambiguous when it comes to ownership of natural resources," said Reidar Visser, Middle East researcher at the Norwegian Institute of International Affairs.
"And the involvement of foreign companies in bilateral deals with regional authorities in the Kurdish areas may exacerbate tensions when contentious issues like federalism are to be discussed in the revision of the constitution scheduled for later this year," he said.
DNO argues the Constitution can be interpreted to mean deals signed by the Kurdish authorities before the Constitution would be honoured, others say the central government has to play the lead role.
REUTERS 04 12 2006Copyright © 2006 Reuters. All Rights Reserved.
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