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Financial Times: Western oil group eyes assets in Iraq

By Ed Crooks and Javier Blas in London
Published: August 22 2007 22:47 | Last updated: August 22 2007 22:47

A large western oil company has offered $700m for oil assets in Iraqi Kurdistan owned by DNO, the small Norwegian oil company. The offer signals that international oil companies are willing to put significant amounts of money into Iraq in spite of the security problems and lack of a legal framework.

DNO refused to name the company, but industry executives speculated that Royal Dutch Shell was a possible bidder. Shell on Wednesday refused to comment.

DNO said it had received an “unsolicited expression of interest from a reputable financial adviser on behalf of a large international oil company”, but had rejected the offer.

Helge Eide, DNO’s chief executive, said in an interview with the Financial Times that the company would focus instead on maximising the value of its Iraqi assets. “There is more and more interest in Iraq, and we have a unique position there,” Mr Eide said.

The offer values DNO’s proven and probable Iraqi oil reserves at about $11.9 a barrel, according to analysts’ estimates. DNO shares surged 11 per cent to NKr10.77 in Oslo.

DNO, which is quoted on the Oslo stock exchange, discovered the Tawke oilfield in late 2005, after signing a production-sharing agreement in June 2004 with the Kurdish regional government, a semi-autonomous area of northern Iraq.

In June, it became the first foreign oil company to pump crude oil in Iraq since the nationalisation of the country’s hydrocarbons industry 35 years ago, albeit on a very small scale.

The company is delivering its production from the Tawke oil field to the domestic market in Iraq at a rate of about 6,000 barrels a day.

Mr Eide said that DNO hoped to be able to begin exports in November, once it had secured approval from the Kurdistan regional government to connect to a pipeline that could carry oil to Turkey.

Shell is seen as one of the oil majors that is most positive about doing business in Iraq.

In 2005, Shell signed an agreement with Baghdad to study the northern Kirkuk oilfield. The area is the subject of a dispute between the Kurdish authorities and the Iraqi central government.

Shell has worked for the Iraqi oil ministry analysing the data on the oilfield.

A number of other international oil companies have signed similar co-operation agreements, or are training Iraqi petroleum engineers.

BP, Statoil, Total, Eni and Repsol YPF are understood not to be behind the bid to DNO.

Industry executives said it was unlikely that a US-based company would have made the offer. ExxonMobil and Chevron refused to comment on specific Iraqi projects.

Copyright The Financial Times Limited 2007

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