Iraqi problems cause further sell off in Kurdistan based oil companies

Shares in the Kurdistan focused oil explorers, Gulf Keystone Petroleum (GKP) and Genel Energy were hit today after the Islamist militant group, ISIS (Islamic State of Iraq), took over Mosul, Iraq’s second biggest city and triggered fears of a break up of Iraq with outright civil war between Jihadists and other groups. ISIS has 3,000 to 5,000 fighters, and grew out of an al-Qaeda-liked organisation in Iraq. Newly reelected Iraqi Prime Minister, Nouri Maliki has asked parliament to declare a state of emergency and so far the US trained Iraqi forces appear to be powerless to take the city back.

GKP, is currently down 6% to 85p and Genel is down 3% to 998p.

As many as 500,000 people have been forced to leave Mosul as Iraqi security forces dropped their weapons and ran for their lives in the face of the entry of the militants. ISIS is already controlling Ramadi and Falluja and there are reports that the group has now taken Baiji, home to Iraq’s largest oil refinery.

This latest threat to security in Iraq comes after reports of apparent problems for the Kurdistan based oil explorers in selling their production through the new oil pipeline to Turkey. These reports were later denied by the Kurdistan government.  Prior to the opening of the pipeline Kurdish oil had to shipped for export sales using a fleet of trucks to Turkish ports. Although the pipeline to Turkey opened in 2013, reports spread that the Turkish government has been reluctant to sell the oil on because of fears of upsetting the central Iraqi government as they and the KRG (Kurdish Regional Government) have been in dispute about royalties from oil revenues.  The regional government denied the claims of delivery problems with a tanker ship carrying Northern Iraqi oil and said that the  oil has been sold at market value and has reached its destination. This followed reports that the US had turned away the tanker carrying the oil from Kurdistan.

The news from Mosul is the last thing that shareholders in GKP need after the problems around the last fund raising round and disappointing reserves update from its giant Shaikan oil field. Never a dull moment in Iraq/Kurdistan!

Contrarian Investor UK

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