Exclusive: Attacks on major Iraqi gas field drive out US contractors

ERBIL, Aug 30 (Reuters) – A series of rocket attacks on a gas field in northern Iraq has sent U.S. contractors to work on its expansion, dealing a blow to the Kurdish region’s hopes of to increase its income and to offer a small alternative to Russian gas.

The Khor Mor field expansion project operated by Pearl Consortium, majority-owned by Abu Dhabi’s Dana Gas (DANA.AD) and its subsidiary Crescent Petroleum, was suspended in late June after three rocket attacks.

Workers at Texas-based Exterran Corp (EXTN.N) returned last month to resume work, but two more rockets hit the site on July 25, forcing the company to leave without a scheduled return date, it said. Kurdish industry and government sources.

Khor Mor is one of Iraq’s biggest gas fields and the expansion plan aims to double production in a region that desperately needs more gas to generate electricity and end blackouts almost daily.

The attacks caused no serious damage and existing operations were not interrupted, but the expansion, which involves the subsequent construction of a new pipeline to Turkey, has been suspended until security in the region is assured, the sources said.

The project, partly financed by a $250 million financing agreement with the American company International Development Finance, also aims to export gas to Turkey and Europe, once the needs of the domestic market have been met.

Exterran is the third contractor to demobilize since attacks on the land began on June 21, with two Turkish contractors, Havatek and Biltek, having already halted work.

Dana Gas declined to comment. Exterran, Havatek and Biltek did not respond to requests for comment.

UNCERTAIN FUTURE

Last year, the Kurdish government signed a contract with the national energy company KAR Group to build a pipeline from Khor Mor via the regional capital Erbil to the town of Dohuk, near the Turkish border, parallel to a existing pipeline. Read more

The delays could cost the debt-ridden Kurdistan Regional Government (KRG) a heavy penalty and leave Kurdish gas export plans on hold.

If the infrastructure is not ready by the May 2023 deadline, the Kurdish government will have to pay Dana Gas $40 million per month until it is ready, the government source said.

“More than that, it’s reputational damage, as the additional security threats add another layer of risk that could impact the cost of capital and insurance,” Ali Al-Saffar said. , head of the Middle East and North Africa program at the International Energy Agency.

ARK did not respond to a request for comment.

Dana Gas has the rights to exploit two of the largest gas fields in Iraq, Khor Mor and Chemchemal, which produce around 450 million cubic feet of gas per day. It also plans to more than double production to 1 billion cubic feet per day over the next few years, enough to meet national needs.

With 16 trillion cubic feet of proven reserves, production could then potentially reach 1.5 billion cubic feet per day, leaving a significant amount for exports.

Dana Gas supplies about 80% of the region’s gas feedstock, according to an industry source.

However, the region’s gas export plan could threaten Iran’s place as a major gas supplier to Iraq and Turkey at a time when its economy is still reeling from international sanctions.

In March, Iran’s Islamic Revolutionary Guard Corps (IRGC) fired a dozen ballistic missiles at Erbil in an assault, which appeared to target the region’s plans to supply gas to Turkey and Europe , officials said. Read more

Although no group has claimed responsibility for the five attacks on Khor Mor since June, Kurdish officials, diplomats, industry sources and energy experts said they believe they were carried out by Iranian-backed militias.

Iran’s Foreign Ministry did not respond to a request for comment.

However, two Iraq-based diplomats said they believed rivalry within the Patriotic Union of Kurdistan (PUK), the party that controls the land where the field is located, led to one party fighting back for been excluded from the expansion project.

A PUK official, who spoke on condition of anonymity, dismissed this version of events.

NO MAN’S LAND

The Khor Mor field is close to a no man’s land between the Iraqi army, Kurdish forces and Shiite militias, from where the first three rocket attacks were launched.

Due to a lack of agreement on territorial control, there are areas where neither the Iraqi army nor Kurdish forces can enter, leaving a security vacuum where militias are active.

But the last two attacks with larger rockets came from areas closer to the city of Kirkuk, which is under federal government control.

“Khor Mor has a lot of potential and can help the Kurds,” said a Kurdish official. “We are under attack from all sides. The future is very uncertain.”

The reverse of the gas plan comes as the oil sector, the region’s financial lifeline, is also in trouble.

Oil reserves are being depleted at more than double the global average and a Federal Supreme Court ruling in February that found the legal foundations of the Kurdistan region’s oil and gas sector unconstitutional forced some foreign oil companies from. Read more

Exterran halted work for safety reasons, rather than the government, industry and government sources said.

Further delays in investment in the sector will weigh heavily on the KRG, which is facing an economic crisis in an already struggling region within unstable Iraq.

The KRG’s debt currently stands at around $38 billion, according to a government official, and MP Karwan Gaznay, a member of the regional oil and gas committee, said oil exports make up 85% of Kurdistan’s budget. Iraqi.

Delays in public sector salary payments, poor public services and corruption have fueled often violent protests over the past two years against the political parties that rule the region.

Widespread economic hardship for young Kurds was also a major factor behind the migrant crisis on the Belarus-European Union border that began in 2021.

($1 = 1,458.5400 Iraqi dinars)

Reporting by Amina Ismail in Erbil and Maha El Dahan in Dubai; Editing by David Clarke

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