US strikes on ISIS ease Iraqi oil concerns

As the United States and its allies prepare to fight ISIS in the Middle East, some energy companies start returning staff to Iraq eyeing improvements in the security situation.

British energy company Genel Energy said on September 8 it started returning staff to the Kurdish north of Iraq following improvements in the security situation.

Meanwhile, British oil major BP said earlier in September itagreed to nearly double production levels at the giant Rumaila oil field in southern Iraq within the next decade to some 2.1 million barrels per day.

Fadel Gheit, a senior oil and gas analyst atOppenheimerin New York, toldNew EuropeonSeptember 8 that the Iraqi government is trying to attract oil companies by giving them better terms.

“That should be positive for the oil companies at least in the near term because of the risk premium the market is putting on just conducting business in Iraq. For all practical purposes the situation could deteriorate although now the feeling is that things are going to change in favor of the government and the US and European allies and others will target this ISIS,” Gheit said.

The Oppenheimer analyst said it is not clear whether or not companies are going to rush and send foreign nationals back to Iraq. “But they will try as much as they can to keep the momentum going and to help the Iraqis keep oil exports flowing,” he said.

On September 10, US President Barack Obama was expected to announce that he will authorise US air strikes in Syria as part of a broadening international mission to take the fight to militants from the Islamic State in Iraq and the Levant (ISIL). In his prime time address to the nation about the threat of the Islamic State, Obama plans to vow a “relentless effort” to wipe out the terrorists “wherever they exist”.

Meanwhile, Genel Energy said on September 8 that operations at the Taq Taq and Tawke oil fields in the Kurdish region of Iraq weresafe and secure. Production from the two fields is unaffected by the violence and combined production is on a record pace, with an average of 234,000 barrels of oil per day since the start of September. In terms of exports, the company said about 182,000 barrels per day was leaving the fields in the north.

Also, Canadian energy company Oryx Petroleum said “tangible improvements” in the Kurdish north of Iraq mean it canreturn to workat the Hawler license area.

But Gheit noted that Iraqi oil production is not going to increase significantly but it’s not going to decline either. “I doubt it very much that the oil companies will accelerate their activities in Iraq. But most likely they are going to keep activities at the same level as two or three or four months ago,” he said.

“They were basically beginning to retreat and the Iraqi government saw that and they tried to reassure them that things are improving and obviously the last thing the US and the coalition would want to see that the government of Iraq failed because of lack of support from the West as well as lack of protection of the oil workers,” he added.

Gheitdescribed ISIS as “former mostly Sunni hard-liners that were fired by the American administration early in the occupation of Iraq which was a bad strategic mistake”. But he added that the tide is turning now with ISIS and in recent days apparently the US increased bombing these terrorists and that degraded their capability significantly.