Iraq conflict has oil companies on ‘knife’s edge’ – by Yadullah Hussain (National Post – July 2, 2014)

The National Post is Canada’s second largest national paper.

Oil executive David Horgan yearns, almost, for the good old days of former Iraqi dictator Saddam Hussain.

“Saddam was reasonably effective — obviously a dictator and unjust. [Current prime minister] Nour al-Maliki has not even had the efficiency of the Ba’ath party,” said Mr. Horgan, managing director of Petrel Resources Plc., which has operations in the country. “They have been arbitrary, corrupt and ineffective. The net result is that it was an event waiting to happen.”

An insurgency that has been simmering for months boiled over this week when Sunni militia groups took control of vast tracts of land in Iraq, effectively erasing the Iraq-Syria border and declared a caliphate in the area it controls.

Dublin-based Petrel Resources has been unable to access its block located in a desert in western Iraq, potentially a “multi-billion barrel oil and gas field,” according to the company.

“It is in a desert area, so nobody really controls it. But the access areas are in the control of Sunni militia,” Mr. Horgan said in a telephone interview from his Dublin office.

Petrel, which has invested US$10-million in the country, was planning to send contractors into the field for seismic work before the insurgency put paid to those plans. The company is also drilling in the relatively peaceful Wasit region in the east in collaboration with TSX-listed Oryx Petroleum Corp. Petrel also worked on a US$250-million project to boost oil production from 50,000 barrels per day to more than 200,000 bpd in the western desert between 2004-2011.

A frequent visitor to Iraq from 1999 to 2005, Mr. Horgan has seen the country’s landscape change after the U.S. invasion of the country in 2003, which toppled Saddam Hussain’s regime.

“Under Saddam it was quite safe — you only had one gangster to deal with. But [after the war] we had lots of interesting experiences with Sunni milita, former Iraqi army and Islamists.”

Oil companies such as Petrel are nervously watching the crisis unfold in the Middle East country, especially as Prime Minister Al-Maliki and his federal government in Baghdad have been ineffective to date in defending parts of the country, although oil infrastructure in the south that provides the bulk of the country’s 3.3 million bpd production remains untouched.

ay Park, a Canadian energy lawyer, says his international clients are looking over their contract clauses to see if they can invoke the force majeure clause, which frees parties from obligation in the event of major incidents such as wars or insurgencies.

“We have now clients looking at the impact of what’s happened and assessing how it affects their own operations,” he said.

For the rest of this article, click here: