Exxon, BP Evacuate Iraq workers amid limited oil drilling impact

Exxon Mobil and BP began removing employees in Iraq as militants continued a push toward Baghdad and a battle raged for control of the nation’s largest oil refinery.

The evacuations come amid government and company assertions that Iraq’s output of almost 3 MMbpd should remain unaffected by escalating sectarian tensions. Exxon has removed some workers from the West Qurna oil field as operations continue, according to a person familiar with the company’s Iraq operations. BP has removed non-essential workers, CEO Bob Dudley said.

While violence is sweeping northern Iraq, the conflict so far spared Iraq’s crude production in the south and the Kirkuk oilfield in the north is being defended by Kurds.

“The only infrastructure that is currently producing and supplying international markets is in the south and will remain untouched,” said Kyle Stelma, managing director of Dunia Frontier Consultants, which researches Iraq for clients.

Fighters from ISIL battled government forces for control of the Baiji refinery in northern Iraq today, a day after clashes in Baquba, 55 km northeast of the capital. A military spokesman said elite Iraqi forces were defending the Baiji refinery, but the comments contradicted local police who said militants had captured the facility.

A fuel tank at the refinery caught fire after shelling by militants, according to the Salahuddin provincial police command. The refinery halted operations because its storage tanks were full, according to Iraq’s Oil Ministry.

The market impact of the clashing continued to be muted, with Brent crude little changed at $114.23 a barrel on the London-based ICE Futures Europe exchange New York.

Companies such as Chevron, Total and Marathon Oil, which are drilling in the Kurdistan region, are continuing to operate. Marathon hasn’t evacuated employees, spokeswoman Lee Warren said. Chevron’s operations continue “as normal,” spokesman Kurt Glaubitz said. Oryx Petroleum reported successful testing and a ramp up in drilling activity in Kurdistan.

The rapid battlefield success of the Islamic State in Iraq and the Levant, or ISIL, a Sunni Muslim al-Qaeda breakaway group also embroiled in battles in neighboring Syria, threatens to re-ignite a sectarian civil war in Iraq. It also risks escalating into a wider conflict that draws in the United States and Iran in defense of PM Nouri al-Maliki’s Shiite-led government three years after the withdrawal of United States forces. Iraq is the largest oil producer in OPEC after Saudi Arabia.

BP CEO Bob Dudley said the violence, which he called “terrible” and said would have “far-reaching, wide-ranging implications” for the region, isn’t likely to spread all the way to the country’s southern oil fields.

“The implications for oil production at the moment appear limited,” he told reporters yesterday in Moscow. “We are of course very vigilant.”

Anti-terrorism forces killed a Saudi fighter identified as Abu Yamama al-Dossary during the “failed attack” on the Baiji refinery. A fuel tank at the plant caught fire during the clashes. The refinery has halted operations since June 15, the police said. Baiji has about 40% of Iraq’s refining capacity, data compiled by Bloomberg show.

“Iraq will have to increase the import of oil products to make up for the loss of Baiji’s production,” Robin Mills, the head of consulting at Manaar Energy Consulting and Project Management, said “Baiji mainly supplies the north, but also Baghdad.”

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