Norway's Det Norske Oljeselskap (DNO) shares were suspended on Monday 21 September and the company share prices were down by almost 45 per cent. This is mainly due to the suspension of its contract by Kurdistan Regional Government (KRG), which is a substantial percentage of DNO's business. The Kurdish government has suspended DNO's operations for a maximum period of six weeks and expects DNO to find ways to remedy the damage done to the KRG's reputation after the recent controversy about the share sale; meanwhile another contractor has been brought in to operate the DNO's production until the dispute is resolved.
DNO International Oil is Oslo Listed and is one of the first companies which has started oil exports from Kurdistan Region. The company is operating in Tawke oil field and productions have started at June 2009. According to the Kurdish Natural Resources Ministry figures, DNO was planning to export between 50,000 to 60,000 barrels per day via Turkey.
The episode was sparked by the disclosure of details of share sales which involves selling a substantial stake in the company by KRG officials to Genel Enerji in October 2008. KRG Natural Resources Minister, Ashti Hawrami was exasperated by Oslo Stock Exchange's (OSE) disclosure on 18 September, which showed the involvement of the minister in the transaction. Hawrami and KRG officials refused to take any questions on the minister's involvement and have issued a statement denying any wrong doing.
OSE claims that DNO knew at the time that the shares were sold to a single buyer linked to one of its projects, and therefore should have identified the buyer. Earlier this year in June Norwegian authorities fined DNO, 2.4 million NKr (370,000) US dollars for not providing sufficient information about the share sale made in October 2008. OSE argued that according to the usual disclosure rules DNO should have identified the buyer, and on appeal DNO was found not to be not in breach of the Securities and Trading Act, for not informing the market, but they were found to be in breach of the Stock Exchange Act for not informing the stock exchange and were subsequently fined.
Ashti Hawrami was named by OSE when considering its decision on DNO's conduct in releasing the information about the Genel Enerji share deal to the market; moreover Dagens Naeringsliv has reported that further investigation has also brought to light Hawrami's involvement by acting as a middle man. The sale involves 43.9 million shares, which is 4.75 per cent of the company and valued at around 30 million US Dollars at the time of the sale. Details are emerging that the stake was held on UK nominee account and was subsequently sold to Genel Enerji which is owned by the Cukurova Group. There are rumours that Hawrami was the beneficiary for the UK nominee account but it is not clear yet as to who have directly benefited from the deal. Moreover DNO disclosed the connection in April when Genel was awarded a stake in DNO's Duhok and Tawke production in Kurdistan Region.
The KRG issued a statement saying that the disclosure is due to a row between DNO and its regulator OSE which had caused "unjustifiable and incalculable" harm to its reputation and added:" KRG has facilitated the treasury shares transaction with the sole intention of helping DNO to raise the capital required for its projects in the Kurdistan Region. We wish to make it absolutely clear that neither the KRG nor any of its ministries, officials, employees or advisers has benefited directly or indirectly, through DNO or Genel Enerji, from the transaction or subsequent resale of the shares referred to by OSE."
DNO reiterated that it does not agree with OSE's decision to publish the content of the document and the resolutions made by the OSE's board of directors and committees. DNO was quoted by Dow Jones newswire saying;"By doing so the OSE has breached its confidentiality obligations and released misleading and incomplete information, and this has caused the media to publish speculative, misleading and incorrect information causing unjustifiable and incalculable harm to the reputation of DNO as well as the KRG and Minister of Natural Resources."