dno magazine people & projects

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DNO is the pioneer oil company thatventures where others hesitate

Superintendant Thaer Naomis ready to export oil from

the Kurdistan region of Iraq

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dno 2010 // PROJECTS 55

2009In March, the tie-in of the Tawkepipeline to Iraq’s northern pipelinesystem was completed and dno wasready for full-scale production.dno divested 11.9% of dETnoRshares, bringing the total ownershipdown to 25%.on 10 May, dno was given formalnotice by KRG to commence exportfrom the Tawke field.on 1 June, dno started initial export.

2008dno shifted focus from exploration towardsincreased production and near-term development.dno responded to the change in the financialenvironment by initiating measures to reduce in-vestments significantly in the short to medium term.The Tawke Phase 1 development was completedand commenced the remaining work to prepare forfull-scale production from the field.Permanent development of the Bayoot field inYemen was initiated with expected completion atthe end of 2009.

recovery rates from mature fields. The sale oftheir UK company and some of their norwe-gian assets to Lundin Petroleum for noK 1.7billion yielded rich dividends for the Company’sshareholders in 2004 and 2005.

ExplorationSecondly, dno increased its focus on produc-tion to exploration in 2003. They deliveredsignificant reserves at low costs in Yemen andKurdistan. Cash flows from high-margin produc-tion in Yemen financed a significant part of theinvestments. dno restructured its activities onthe norwegian Continental Shelf, generating anet gain of noK 871 million.

Det norske oljeselskapIn november 2007, the Company decidedto combine their activities in the north Seawith Pertra ASA (now known as det norskeoljeselskap ASA (dETnoR)), creating thesecond largest oil and gas company in norway.dno’s shareholdings in dETnoR are currentlyat 11.66%. Activities outside of the norwegianContinental Shelf are carried out by dnoInternational ASA.

Increased productiondno is now in its third cycle, focused on build-ing a strong position in low-cost, high-potentialareas and increasing production capacity froma large developed reserve base. It will continueto grow both organically and through activeparticipation in consolidation opportunities.

content

||we see opportunities where others see threats, and this was particularlythe casewhenwe entered kurdistan in 2004. helge eide

2 PEOPlE& // dno 2010

04 | Interview: Helge EideWhere will DNO’s future growth come from

06 | DNO’s WOrlDDNO’s production and exploration assets

08 | Fast track – low costTheir small size is their advantage

14 | Our processThe DNO process in short

16 | Energy friend in KurdistanDNO is pioneers in what may become oneof the biggest oil exporting regions

22 | Well connected and protectedIf DNO succeeds, so will KRG(Kurdistan Regional Government)

24 | local opportunities“DNO puts money in the bank, andyou are the money”

28 | Sharing the risks andthe opportunitiesDNO’s strategy is to find the bestpartners in the market

30 | Water & WomenEnvironmental awareness and careeropportunities for women

34 | Good neighborsKurdish villages benefit from theoil exploration in their area

36 | From field to marketHow it works

38 | Transparent transactions“We never had any problems with auditing”

42 | responsible ActionsThey are the good guys, buthow to prove it?

44 | rock and oilGeological understanding isDNO’s core value

46 | The treasure chestThe Romans discovered Yemen’s fertileland in ancient times. Now DNOexplore it’s rich grounds

52 | The history of DNO

DNO International ASAStranden 1, Aker Brygge,

N-0250 OsloP.O. Box 1345 Vika,0113 Oslo, Norway

Phone: (+47) 23 23 84 80Fax: (+47) 23 23 84 81

[email protected]

Designand production

Red Kommunikasjon ASwww.redkommunikasjon.no

EditorIngunn Solli

Art DirectorChristen Pedersen

TextElizabeth S. Lingjærde

PhotoHans Fredrik AsbjørnsenDNO International ASA

IllustrationsTorgeir Sollied

PrintingKonsis Grafisk AS

PEOPlE &PrOjEcTS

DNO 2010 // PrOjEcTS 3

4 PEOPlE& // DNO 2010

interview Helge eide

There are some funda-mental principlesunderpinning DNO’sstrategy and substan-tial creation of valueover time.“One such principleis our project-orientednetwork model. It has

been decisive in enabling a small company likeours to undertake such large projects. In 1996we were 5-6 employees, entirely dependent on agood network. Today we are 550, but the modelis still viable”, says Managing Director Helge Eide.DNO has always been a different kind of oilcompany. “I guess we have an unorthodoxapproach to our projects. In some instances wetend to act more as a contractor. This enables usto utilise our best practice experiences from oilcompanies and service providers, and it helps uscomplete our projects in a rapid and cost effici-ent manner. We have a flat company structurewith open communication lines. At the sametime, we require loyalty to formal decisions. Thisis a demanding, but efficient model which givescompetitive advantages”, says Eide, underliningthat DNO has always had a strategy of avoidingcompetition as far as possible.“We see opportunities where others seethreats, and this was particularly the case whenwe entered Kurdistan in 2004. We have alsoseen opportunities in projects where otherslooked for an exit. A good example of this is

the first period after 1996, when business to alarge extent was based on the tail production onmature fields on the UK Continental Shelf. Wethen took over a large field which was about tobe shut down, and contributed to extending thefield’s lifetime by several years. We also boughtour first license in Yemen from a company thatwanted out. Later, we entered the NorwegianShelf as one of the first smaller oil companies.Today there are several such companies opera-ting in the North Sea, but in many ways DNOprepared the ground for them”, Eide points out.The term low cost, fast track is important

to DNO. “This is illustrated by our projects inYemen and Kurdistan. In our opinion, gainingaccess to oil, as well as developing discoveriesto production at the lowest possible cost, areamong the most important value-creating fac-tors in an oil company. This is defined as findingand development cost (F&D costs). DNO has agood track record here, and measured by thiskey parameter, we have been among the topthree in the Middle East for several years.An important growth factor for an oil com-

pany is discovering more than it produces eachyear. Also here, DNO has been best in class.“DNO’s ability to deliver on these key factorshas been a trademark for the Company”,says Helge Eide.DNO’s activities in Yemen and, not least, in

Kurdistan are perhaps the best examples of therisk willingness and pioneer spirit prevailing inthe Company. “In Kurdistan we entered an area

where practically nobody had been before us,and we have built a full scale operation here veryquickly. Three years from entry to first produc-tion is a very short time, and in 2009 we receivedthe final permission to export oil from the field,enabling us to test the field’s full capacity. We arevery pleased to have confirmation that the facili-ties deliver according to our expectations.DNO is now in what may be called the Com-

pany’s third growth cycle. Our core activities areconcentrated on exploration and production inlow cost areas. “During the next growth cycle,the Company intends to continue building onthe good experiences gained. Future growthmust be safeguarded through a more diversifiedportfolio. Our work related to the explorationactivities in Mozambique is starting to give ushope that we may have a new growth area here.We are also looking at new opportunities in theMiddle East and Northern Africa. We may alsolook for new offshore opportunities”, says Eide.The future growth will come from a combi-

nation of organic growth through explorationactivities, and mergers and acquisitions. “Acondition for this is, however, financial strength,which we believe will come when we are able tofully utilise our production capacity”, says Eide.He points out that DNO may triple its oil pro-duction in a short period of time, and most ofthe investments for achieving such productionincreases have been made. “Without a doubt,we have a good foundation for further growth –both in the short and long term.”

Ever since the revitalization in 1996, DNO has been a different kind of company,exploiting opportunities where other companies see threats.

A different kind of

oilcompany


||Without a doubt, we have a good foundation forfurther growth – both in the short and long term.


dnO’s wOrld

WHErEArE WE?DNO serves as operatorand active license partnerin several production andexploration assets and asinvestor in other companies.

UK

DNO has earlier operatedthe Heather/Broom and ThistleFields on the UK ContinentalShelf (UKCS). These assetswere divested in 2004 as partof a change in the Company’sstrategy. DNO re-entered theUKCS in May 2005 taking a 50%working interest and operatorshipin P1067 (Block 211/22b) locatedin the northern North Sea.

NOrWAy

DNO’s headquarter is in Oslo.The Corporate function, theSubsurface Teams and the Ad-ministration are situated in Oslooffice. DNO has no operations inNorway, but participates on theNorweigian Continental Shelf(NCS) through its 11.66% share-holding in Det norske oljeselskapASA.

EQ. GUINEA

DNO entered Equatorial Guineain 2003 through participation inexploration of an offshore block.GE Petrol is the operator on BlockP, and DNO holds a 5% interest.A plan for development andoperation (PDO) for Block P wassubmitted, by the former operatorDevon, in August 2007. The PDOis currently being revised.


KUrDISTAN rEGION OF IrAQ

In june of 2004, DNO entered into production sharing contracts (PSC) withthe Kurdistan Regional Government (KRG) in Northern Iraq. As one of the firstinternational oil companies to enter this highly prospective region, DNO holds akey position in developing the local oil industry. DNO is operator for three licensescovered by the PSCs. DNO has completed one fast-track field development of theTawke field. Export of crude oil from the Tawke field commenced 1 June 2009,marking another important milestone to DNO and KRG. DNO has an office locatedin Erbil, running the operations. The DNO Iraq management is located in Dubai.

yEmENDNO entered Yemen in 1998 and was approved as Operatorlater that year. The Company quickly expanded the operationsthrough successful exploration and fast-track developments.DNO has further expanded its operations in Yemen and is cur-rently holding interests in seven assets, all located in the prolificSayun-Masila Basin. Oil has become an important part of Yemen’seconomic basis and DNO is working closely with the authoritiesto further develop the oil resources in the country. DNO has anoffice in Sana’a, running the operations. mOzAmbIQUE

DNO was awarded an Explora-tion and Production Contract(EPC) in 2003 for a total of eightyears. After drilling two dry wells,the focus has been switched tothe unexplored Urema Grabentowards north in the license. DNOhas acquired a total of almost 800km 2D seismic the last few yearsand is preparing for explorationdrilling in 2010. The InhamingaBlock is stretching from the portcity of Beira and North towardsthe Zambesi River.

fASt trACk – LoWCoStDNO is good at converting resources to reserves at low cost and bringingreserves into production fast. This is a major competitive advantage.

neWventureS

A WINNING STrATEGy



||Wehave fewmeetings, no red tape and a topmanagementworkingas a team, not as an authoritarian structure. tore Lilloe olsen


Oil companies world wideare struggling with keepingup their reserves and pro-duction, due to increasedscarcity of easy oil andgas. By moving early intoemerging, and often more

risky areas, DNO is rightfully called pioneers,and thus managed to keep their RRR (ReserveReplacement Ratio) high.“We focus on early entry into prosperous areas

and aim for first-mover advantages”, says Cor-porate Head of Exploration Tore Lilloe-Olsen.

Open linesIt’s not uncommon to bump into the CEO, or otherkey management in the hallways of DNO’s offices,whether you visit them in Oslo or Dubai. Doorsare always open, so are their communicationlines. People pop their heads in and out of offices,always ready to hear news, help out or discuss anidea. “We have few meetings, no red tape and atop management working as a team, not as anauthoritarian structure”, says Lilloe-Olsen.

carrier rigTo lease a rig for drilling of wells maybe thegreatest cost on an oil company’s budget. Foroffshore drilling, the day rate for a rig easilyreaches USD 500,000. Onshore drilling rigs areless expensive and DNO owns a small carrier rignamed Sindi#1 after the Sindi tribe in NorthernIraq. This is a special design rig for fast move-ments between the various well sites. It’s sosmall that the mast is mounted on the carrieritself. The Sindi rig completed the Erbil#2 well

tests in March. The test results confirm sub-stantial in-place volumes, but the productivityand recovery from Cretaceous is still question-able. Jens-Petter Nørgård, Head of PetroleumTechnology, was monitoring the well test on siteErbil#2 and is now analyzing and integrating thetest results in the reservoir modeling work.

multi tasksSubsurface experts, geophysicists, geologists,petrophysicists and reservoir engineers areput together in experts teams, specialized indiscovering and developing hydrocarbons, likeNørgård, who is daily working in the sub-surfaceteam based in Oslo. With the managementof DNO Iraq AS based in Dubai, the produc-tion organization on site in Kurdistan, and thesubsurface team in Oslo, strong cooperationand communication is necessary to deliver goodresults. Their success show how flexible DNO is.“Since we often operate in remote areas, all

services are not always available, and we haveto cope with what we have. Each one of us maynot have all the knowledge, but together as ateam, we are able to do all the multiple tasks”,says Canadian Rod Vallee, Drilling Superinten-dent on the Sindi #1 rig, and responsible forboth personnel, equipment, service and the rig,which he followed from construction in Shang-hai, mobilized via Dubai to Kurdistan. He is alsokeen on emphasizing the importance of hiringlocal work force.“For DNO it is a rule to give preference to local

resources. By hiring locals, we keep a goodrelationship with the authorities and the localcommunities”.

neWventureS

|| for dno it is a rule to give preference to local resources.By hiring locals, we keep a good relationshipwith the authoritiesand the local communities. rod vallee, drilling Superintendent

Corporate Head of ExplorationTore Lilloe-Olsen.

Rod Vallee, DrillingSuperintendent


EXPErTISE IN GEOlOGIcAlUNDErSTANDINGDNO’s extensive experience in explora-tion, operations and production of oilis unique. Their core team of skilledsubsurface specialists has succeededin finding oil, describing the geologicalconditions in detail and managing thereservoirs through production.

SHOrT DEcISION lINESManagement operates through coop-eration with short decision lines and aminimum of self imposed hurdles. Proj-ect teams handle multi tasks with ease.The same team takes responsibility formoving the project from exploration toproduction, making transition betweenthe different project phases seamless

with no handover or loss of momentum.The core team is made up of in-houseresources so that knowledge is retainedand built upon for projects to come.

DIVErSIFIED POrTFOlIOCurrently DNO is operating in threemarkets with different but complemen-tary properties:Yemen – Keeping up production of20,000 barrels per day in mature fields.kurdistan region of iraq – Developing apotentially high production from currentlevel of 6,000 barrels per day.Mozambique – A frontier area with highrisk but high potential, currently at theexploration stage.DNO will continue to focus on their tar-get areas in East Africa, North Africa and

the Middle East, to build up an even morerobust and diversified market portfolio.

bUSINESS KNOW-HOWDNO is one of Norway’s oldest oilcompanies, with vast experience fromboth offshore and land based explora-tion. The Company has been throughcomplete make-over, from strategiesto management and ownership. Today,their staff is highly competent andinternational in every aspect.

EXclUSIVE DEAlSIn Mozambique, DNO has exclusiverights to a huge area with potential gas(and oil) reserves. The area is part of thegreat East African rift, which is the larg-est continental rift system on Earth.

DNO’S rEcIPE FOr SUccESS


So far, only gas has beendiscovered in Mozambique,but – as everyone knows –where there is gas, there mayalso be oil.“The sediment basin in

Mozambique is part of thecontinental rift and measures

approximately 400,000 square kilometres,”explains Jarl Aagedal, Country Manager for DNOand a petroleum engineer who has worked inthe petroleum industry since 1969. He also pos-sesses local knowledge, a key factor for success-fully establishing good cooperation between theCompany and the authorities, contractors andthe local communities affected by the activities.

Virgin territoryThe potential oil adventure in Mozambique isonly just beginning, but DNO is one of the firstto have started exploration work, an activitywhich Mr Aagedal refers to as “wildcatting”.

“This is virgin territory, where very few oil com-panies have been engaged, and we are in a veryearly phase in terms of a potential oil extrac-tion,” he points out. Nevertheless, he believesin the possibility of making commercially viableoil discoveries: “We have conducted seismicsurveys and drilled exploratory wells and havefound indications of gas. In the first well thereservoir seal was broken, presumably as a re-sult of earthquake activity in the African Rift. Inour area, 10 kilometers too far east or west canbe wrong. But the theory clearly indicates thatthere may be oil in the area,” says Mr Aagedal.

road building and mine clearingThe area to be explored is vast. The InhamingaBlock, which is the area for which DNO has anexploration license, covers approximately 11,000square kilometers. By comparison, a North Seablock measures 450 square kilometres. Much ofthe area is pure wilderness covered by dense forest.“In the southern area covered by our license,

Mozambique is not yet one of the world’s oilnations – but that could soon change. DNO is one of

the few oil companys to have been awarded an explo-ration license in this vast country in south-east Africa.

A LAndofopportunitieS

neWventureS

1. Jarl Aagedal,Country Manager forDNO Mozambique.

2. Inspection of seismicline in the Urema Graben.

3. Dry soil gassampling performed byErik Syrdalen, Business

Unit Manager.

4. De-mining in theInhaminga area.

5. Acquisition of the2009 seismic survey.

6. De-mining vehicle.

1

3

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norWegiAn LegiSLAtionproteCtS MozAMBique

mozambique protects its naturalresources, thanks to assistancefrom Norway, not least.

in 1992 Mozambiquemade the transition to amarket economy, and two years later it enteredinto a cooperation agreement with Norway fordeveloping the country’s system of petroleumadministration. Mozambique’s administrationsystem is therefore very similar to that of Norway.

“norwegian petroleum legislation is exceptionallydemocratic and has a good reputation internation-ally. Guidance on petroleum administration hastherefore been a significant part of Norwegianaid for many years,” says Mr Aagedal, who in 1996was the local representative for the NorwegianPetroleum Directorate ‘s development cooperationwith the then newly established Petroleum Officein Mozambique. “We came in to provide guidanceand training. We were also supposed to assistwith commercializing a large gas field which wasoriginally discovered in 1963 but which was notcommercially productive at the time.”

Jarl Aagedalwas the Norwegian PetroleumDirectorate’s local representative up until 2002,after which that function was discontinued. Bythen Mozambique had developed the Pande Fieldand had built a gas pipeline to South Africa.

While the gas in the south was concentratedon for a period, international industry began toshow an interest in other parts of the country.DNO is now one of eight companies to havebeen granted exploration licenses. DNO’s licenseexpires in 2011.

the companies are granted licenses for givenareas for a maximum period of eight years, dur-ing which time they are obligated to undertakeprograms that involve seismic surveys and testdrilling. The companies have the right to retainthe areas that cover any commercial findings for30 years.

“if oil is found, this could prove to be a fantasticadventure for Mozambique,” says Mr Aagedal, whobelieves that the country will avoid the resourcecurse: “The democratic principles are in place andthe country has a good administrative system andthe ability and will to enforce its laws”.

the main road runs from the port city of Beirato Zimbabwe, Malawi and Zambia. The nationalhighway runs across the northern part. Thismeans that we can drive on reasonably goodand asphalted roads between the southern tothe north-eastern areas covered by our license.But we have to build the roads out to the wellsites ourselves,” Mr Aagedal explains. DNO hastherefore constructed 36 kilometers of road toone well site and has improved 80 kilometers ofroad to another one, including river crossings. Inaddition, the crews must undertake mine clear-ing before the roads can be laid, and the rainyseason and flood gullies create extra problems.

Good corporate citizen“We cooperate with the local authorities in theregion, where the majority of inhabitants aresubsistence farmers. They really appreciate our ar-rival, partly because we use local unskilled labourand pay well,” says Mr Aagedal, who also pointsout that exploration activities in Mozambique

require exceptionally thorough planning. Thereare stringent requirements for corporate commu-nication and information to the local authoritiesand inhabitants. The activities must also leave thesmallest possible environmental footprint. “That iscompany policy and a moral requirement of ethi-cal conduct. We should act as a good corporatecitizen in small communities and, for example,provide equipment to schools and health clinics.This requires having a good dialog with localauthorities or tribal chiefs,” says Mr Aagedal.When DNO undertakes test drilling, it trans-

ports between 50 and 60 containers holdingequipment in addition to the drilling rigs. “Wealso have to arrange for providing supplies forour operations. That is why we try to stay sixto nine months ahead of our plans. There isa massive injection of capital involved in theexploration phase, but if we make commerciallyproductive findings, vast areas will suddenlybecome prospective. DNO will then open theway to a whole new oil adventure.”

|| the theory clearly indicates that theremay be oil in the area. Jarl Aagedal

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thednoproCeSS in Short


Our prOcess

01business Development

for dno, business development is to monitor thetransaction market for good opportunities that fitwith the Company strategy. It is about meeting withother companies and utilize the business network,that often imply data room visits to evaluate qualityand potential of assets. It is always a competition withother interested parties. We need to be cleverer thanthe others, but sometimes it is a bit of luck too.tore Lilloe-olsen,Corporate head of exploration, oslo

02 Exploration

the dno staff has a long and broad experience inexploration for oil and gas. DNO has during the 10 lastyears focused on onshore basins, which often allows forgeological fieldwork as a part of the integrated geologi-cal analysis, in combination with seismic and well data.Seismic data acquisition onshore is often time consum-ing, while onshore exploration drilling is often less timeand cost consuming, compared to offshore operations.nils Bang, exploration Manager,kurdistan Business unit, oslo

03 Field development

When a discovery has been made and a positivewell test has been performed, the field develop-ment studies can start. All subsurface informationis integrated into a reservoir model that forms thedesign basis for reserve calculations, economicanalysis and functional requirements for wells andtopside facilities. The final product of this phase isthe Plan for Development and Operation (PDO),which forms the basis for a development decisionole nygaard, Chief petroleum engineer, oslo

01

02

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04 Project Execution

When the PDO has been sanctioned by the partner-ship, and approved by the authorities, the procure-ment and engineering work can start. A projectorganization will execute the project by extensiveuse of vendors and subcontractors. Along with engi-neering and construction of the topside facilities, theinitial production drilling will be executed, in order tosecure early production start up and early revenues.Jon Petter Sargeant, Operations Director,Kurdistan Business Unit, Dubai

05 Production

DNO’s production comes from 5 fields in Yemen and 1 field inKurdistan. In Yemen, Tasour, Godah and nabrajah are all dnooperated, Sharyouf and Bayoot are operated by dove. TheTawke Field in Kurdistan is dno operated and represents themajor share of the Company’s oil reserves. The field is ableto deliver in line with the design capacity of 50,000 bopd. In2009, the average gross production was 21,511 bopd, and thedno working interest production was 12,285 bopd.Eric Aillaud, ProductionManager,Kurdistan Business Unit, Dubai

06Transport & Sale

FromDNO’s production facilities the crude oil isexported in pipelines to the international market,or sold to the local market. In Yemen, crude oil isexported to the delivery point (transfer of rights)located in Block 14 operated by nexen. nexentransports the crude oil from the delivery pointto the shipment point at the coast. Settlementfor crude oil is based on international marketprice and is received on a monthly basis.Gaute Belstad, Advisor Finance, Oslo

04 05

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EnErgy friEndin kurdistanThey have the license, the ownership, the people, the pipeline and the oil.Besides, DNO got a head start as a pioneer in what may becomeone of the biggest oil exporting regions in the world.

dno in kurdiStAn


||going into the kurdistan regionwhen everyone elsewas reluctant to dosowas not easy. Magnenormann, Managing director of dno iraq AS.

Managing Director of DNOIraq AS, Magne Normannplayed a major part of theirearly success in making theright connections.


DNO is the pioneer oilcompany who signedtwo contracts with theKurdistan Regional Govern-ment, three days beforethe interim governmentwas instituted in Iraq.

Managing director of DNO Iraq AS, MagneNormann, recalls the time DNO entered theregion and signed the PSAs (Production SharingAgreements) with the Regional Government ofKurdistan on 25th June 2004. Timing was a keyissue because at the time it was improbablethat agreement could be signed after such aninterim government was formed. “We managedit at the last minute,” he says. But getting thereand knowing exactly what to do was the resultof highly skilled networking and diplomacy thattook some time. Mr Normann had made theright connections, thanks to his long and world-wide experience in the oil business.

Fast developmentCharley Dunn, DNO’s Drilling Manager, hasknown Mr Normann for years, and pinpointswhat makes DNO succeed where others fail: “They hire people who are truly dedicated. Thereis no limit to what people here can do. They sethigh standards and low fences. When you’re in,you understand people are their biggest asset.”Having completed the initial regional geological

assessments, seismic acquisition commenced onthe ground on 17 May 2005 and was completedin September. The location of the first well wasdetermined, and in October 2005 DNO had theirfirst drilling rig mobilized from China. The testwould be the Tawke anticline. “Needless to say,it was very important to DNO to strike oil in thefirst well; and so we did,” says Mr Normann. Thatearly success led to a fast-track field developmentof Tawke, with more wells being drilled and asuitable process plant for crude oil being built to

remove water and gas. In parallel to constructinga Central Processing Facility they built an exportpipeline from the Tawke field to a tie-in pointconnecting with the existing Iraq/Turkey pipelines,close to the border with Turkey at Peshkabor.

Driven by idealismPeshkabor is an Assyrian (Christian) village,which was totally demolished by SaddamHussein in 1988. Among the men who lost theirhomes and many members of their families isGeorge Yacu, who became the first, and mostimportant, contact for DNO in the KurdistanRegional Government (KRG). “George is ourmost trusted man, and has a vision and futureperspective for energy development in Kurdis-tan that is very much aligned with that of DNO,”says Mr Normann, with great respect for the78-year-old KRG professional.George Yacu and his family emigrated to the US,

but George spends a considerable amount of histime in Kurdistan to help rebuild his beloved homecountry. He does it out of pure idealism, providinghis vast knowledge of the Iraqi oil industry, and isthe Senior Advisor to the Prime Minister on oil andgas issues, among many other duties. “Very fewpeople actually believed there was oil in our re-gion,” recalls Mr Yacu, as we meet him over dinner:“Lots of wrong ideas were flying around. But wehad the competence to know otherwise,” he says.During Saddam Hussein’s regime, George

Yacu was responsible for oil exploration in thewhole of Iraq. George Yacu had a comprehen-sive organization at that time, and one of hissubordinates was Tarik A Abdullah Chalabi. MrChalabi was recruited by DNO towards the endof 2004 to manage DNO locally. When Mr Yacuand Mr Chalabi worked in Baghdad, the Kurdishpeople were not allowed to develop any oilbusiness activities on their own territory, theKurdistan Region. This changed back in 2004when DNO, as the only international upstream

dno in kurdiStAn

||Weknew from the very outset that good security was key forattracting service providers to come to kurdistan. Magnenormann

kurdistan region is an autonomous,federally recognized regionof iraq. itscapital is the city of erbil. the regionisofficiallygovernedby thekurdistanregional government (krg).

Population by 2010 is estimatedto be 8 million.

As a major economic power inIraq, Kurdistan region has the lowestpoverty rates and highest standardof living in Iraq. It is the most stableand secure region of Iraq.

Until 1979, Iraq reached peakproduction of 3, 7 million barrels perday, only passed by Iran and SaudiArabia. Today, their oil production isheavily crippled by years of politicalturmoil, and less than half of theirknown oil fields are used.

DNO signed their first PSA (Pro-duction Sharing Agreement) withthe Kurdistan Regional Governmentin June 2004. They were the first oilcompany to sign an agreement.

Today, DNO has 14 wells in theTawke area, where they currentlyhave reached an export capacity of50 000 barrels per day.

kurdiStAnregionof irAq:


KRG member and oil businessveteran George Yacu has beenassociated with DNO since theysigned their first ProductionsSharing Agreements.


dno in kurdiStAn

||george is ourmost trustedman, and has a vision and futureperspective for energy development in kurdistan that isverymuch alignedwith that of dno. Magnenormann


oil company, had the courage to explore for oiland gas in Kurdistan. Others were invited butdeclined for various reasons, mostly associatedwith political and security risks.George Yacu had by then spent a few years

with the sheikhs in Abu Dhabi, today one of theworld’s richest oil regions. He has experiencedhow countries and regions develop from thepioneering stage of a growing oil business andof how it this completely changes people’s lives.“In those days people collected stamps andtraded in passports and pearls,” he says witha smile. People were generally quite poor, butthey had a lot of pride. So, they would come toour oil camps to ask for jobs, but their qualifica-tions would be for jobs as drivers or guards inthose days. Nothing less,” he adds smiling.The older generations of Abu Dhabi and Kurd-

istan have a common history of a troubled past,the kind of experience that shapes great men.Yacu is more worried about today’s money-driv-en generation inheriting wealth and forgettingthe past. Mr Yacu is interested in collecting rarebooks, stories and history, and will make sure thathe also remembers the past. He is a walking li-brary, and has written a few historic texts himself,though only in Arabic. He is concerned about theKRG’s role in preserving the Kurdish heritage andhas also been a major contributor in the rebuild-ing of his childhood village, Peshkabor.

Security is key“We knew from the very outset that good securitywas key for attracting service providers to cometo Kurdistan, “says Magne Normann. “Ardan washired as our security consultant, and together wedrafted security plans for all of DNO’s activities inKurdistan,” he explains. DNO had the full supportof the Prime Minister, HE Nechirvan Barzani, tomake use of the excellent KRG security organiza-tion. The work started on the land close to thecity of Dohuk, and Mr Said Shengali was given thetask of making sure that DNO was well looked af-ter from a security perspective. “The cooperationwith the KRG security service in Dohuk has beenoutstanding, with zero security-related incidentsfrom 2004 up to today,” says Mr Normann.The initial stage of attracting seismic service

companies to mobilize equipment and person-nel to Kurdistan proved to be difficult. DNOmanaged the task very well. A Canadian com-pany, Terra-Seis International, had the courageto get the work done, and DNO was in business.Once the world observed DNO’s performance

in Kurdistan on all fronts, it became easier to mo-bilize other support service companies. The GreatWall Drilling Company of China was the nextcompany to bring its first drilling rig into the re-gion. Today, more than 30 foreign oil companiesare established in the Kurdistan Region, which, ifall goes well, will be one of the greatest places tobe for the oil business in the near future.

1. General Managerfor DNO in Kurdistanregion Tarik Chalabihas links to markets

that might be vital forfuture explorations.

2. The KurdistanRegion has a long

tradition of bringingtogether people from

different political,religious and cultural

backgrounds.

1

2


Since gaining peace, the north-ern part of Iraq bordering onTurkey and Syria has developedat a rapid rate. Today it is adynamic hub of new ventures,many of them funded byforeign companies who believe

the regional capitol Erbil may become the Dubaiof the Kurdistan Region. However, without thecooperation of local driving forces, being at theright place at the right time and with the rightbusiness, is not always easy.

First and foremostWhen DNO staff fly into Erbil, from Dubai orOslo, they use Zagros Air or the other inter-national airlines serving different locations inthe Middle East and Europe. The Zagros namepops up as part of the electricity system andconstruction of health institutions, to name buta few areas in which this fast-growing group isexpanding. Today the KRG is Zagros’ biggestcustomer, as the Zagros Group is building agreat deal of the infrastructure in the region.“The mentality is very different now. We are try-

ing to link Kurdistan to the rest of the world. Ourgroup is not only rebuilding our future here, butencouraging foreign investors to take part in it,”says the Company’s CEO, Delsoz Sherwani, be-hind a desk in his main office which, by Europeanstandards is quite modest. But modesty is notthe word when it comes to the Company’s ambi-tions for future development. “This region is nowoffering the safest and most promising environ-ment in Iraq. We are very optimistic because weare going in the right direction. We participate ininvestor forums and exhibitions all over Europeto attract new business. The future is very brightindeed,” he says, with a broad smile.

links to TurkeyThe Zagros Group first shook hands with theDNO management in 2006, when it was de-cided to develop the Tawke oil field. He tells thestory of how the partnership evolved: “WhenDNO first decided to develop the oil field, wewere invited to tender for this constructionwork.” says Mr Sherwani and continued “We atZagros considered this opportunity to be veryimportant to us as nobody else has progressed

WeLL ConneCtedAnd proteCted“If DNO succeeds, so will we,” says the KRG

(Kurdistan Regional Government) which choseDNO as its pioneer partner back in 2004.

dno in kurdiStAn


like DNO did. We teamed up with the Turkishcompany PEICC, and we jointly presented ourtender to DNO which resulted in contract award.”“For us, the joint establishment of Zagros andPEICC was a good choice at the time. It enabledus to carry out the Tawke field development bya joint venture consisting of a local contractorwith a link to Turkey, which from a technical andpolitical perspective was important. Having solidlinks with Turkey is important to us,” says MagneNormann, Managing Director of DNO Iraq AS.

ready for Export!Peshkabor is a small village close to the borderwith Turkey. DNO’s pipeline from the Tawke oilfield is connected to the Iraq/Turkey pipelineinfrastructure and the global oil market atPeshkhabor.“We connected the Tawke export line to the

existing pipelines in early 2009. We commencedexporting on 1 June 2009 and stopped on 22September in the same year, as instructed bythe KRG. We reached the maximum export flowrate of 50,000 barrels per day in a very shortperiod of time. The quality of the oil is tested

and accepted by the SOMO organization, whichis responsible for marketing and exporting ofcrude oil from Iraq. Our oil is comingled withcrude oil flowing from other fields in Iraq, andthe comingled crude oil is then sold on theglobal market,” says Thaer Naom, Superinten-dant at the Tawke oil field.DNO has its own dedicated area at Peshkabor,

with modern facilities to house a substantialnumber of guards and operators. The guards andoperators are all locally employed. “The securityguards are doing a fine job on ensuring that allcrews working for DNO feel secure and can carryout their work undisturbed,” Mr Naom adds.Everyone at DNO is very pleased with the secu-

rity arrangements in DNO’s area of operations.

Good securitySecurity is alpha and omega for DNO’s successand for that of the entire Kurdistan Region,which in this respect cannot be compared tothe rest of Iraq. As one enters the city of Dohuk,not far from the Tawke oil field, an impressiveconcrete building in happy pink welcomesthe visitors and reassures the inhabitants that

security is in good hands. Said Shengali, who ishead of security is a former teacher who, after21 years of imparting his knowledge of Kurdishhistory and language to the next generation,changed his fate with his homeland’s fate. To-day he is a man who is loved and respected forthe fact that the children no longer have to fearwalking down the street or going to bed feelinginsecure about what the next day will bring.When asked how many security personnel hehas under his command, he makes a gestureas if embracing the world and smiles: “Ask howmany people are employed altogether in Dohuk.That is how many security guards we have.”DNO is, however, very special to Mr Shengali.DNO is the foreign company to be given specialprotection by his army of security. DNO’ssecurity unit, a small “army” by some standards,consists of about 260 of DNO’s 470 employeesin the field. Since DNO is the first, and we callthem the pioneers from Norway, to carve outour future as a major oil producer, they are VIPsto us. If DNO succeeds, then we will succeed.That is why we do everything to protect andhelp them,” Mr. Shengali explains.

|| if dno succeeds, thenwewill succeed. that is whywedo everything to protect and help them. Said Shengali

CEO of Zagros Group Delsoz Sherwani is part of theadvisory board helping DNO to do good businessand networking in the Kurdistan Region.

Managing Director of DNO Iraq AS, Magne Normannshake hands with head of security Said Shengali,who offers DNO special protection.


LoCAL opportunitieSAt Tawke, the oil-rich hillside the geologists call an anticline, 14 oilwells stand among sheep and tiny villages. Over 120 men workshifts on the site. The future is bright, upon a troubled past.

dno in kurdiStAn

DNO 2010 // Portraits 25

The temperature is close tozero when we arrive, but inthe summertime it can beas high as 50 °C. The land-scape is barren, but green,and is situated amongsnow-capped mountains.

Only farmers with ancient knowledge of pas-tures and agriculture can handle these condi-tions. But DNO offers more than shepherdingand farming skills to the new generation oflocal inhabitants; it offers a sustainable future.“Since the beginning we have provided water,

infrastructure and training. We have studentsfrom the nearby town of Zakho here, to showthem how theory is put into practice. We alsovisit local schools, where we tell them this:“DNO is putting money in the bank, and youare the money,” says superintendant ThaerNaom, who has a BSc in Chemical Engineer-ing from Baghdad and 23 years of workexperience at the BAIJI Refinery.


|| it’s great working for dno. it’s good for our development, for employmentand for learning about european culture. Mohammedhussein khalil

Security is a normalpart of life in theMiddle East, besidesoffering good jobopportunities for thelocal inhabitants.

dno in kurdiStAn


A caring companyAnd they are indeed earning good money; theaverage salary at the oil field camp is well abovethe regional average. DNO is committed to trainpeople on site to operate the facilities safely atthe highest standards. Local personnel are oftenjoining DNO at entry levels and enjoy trainingschemes that will offer personnel more respon-sibilities and attractive jobs in the future.One local employee of KRG Security is Officer

Mohammed Hussein Khalil. “It’s great workingfor DNO. It’s good for our development, foremployment and for learning about Europeanculture. They are nice people with good experi-ence, and they communicate well. Believe me,I’ve visited almost every foreign company in thisregion, and DNO is by far the best,” he says.His own communications skills are quite good,

too. As we drive around the area, he makes hisdaily phone calls to his mother and the sur-rounding village chiefs. “We just need to knowhow they’re doing. If someone needs something,we help them out. We want everyone around usto be happy.” He suddenly becomes thoughtfuland adds: “My family’s village was destroyed bySaddam. But he did not only destroy the build-ings; he made us fearful. It takes time to changeminds. Everyone lost someone,” he says, quietly.

A different mindsetThe security procedures at the Tawke field areprepared by Ardan, a security company that hasbeen working with DNO from the very begin-

DlOVANADmAN KArIm,Assistant Cook“DNO takes verygood care of us. It’s agreat place to work.”

ScAlA AzIzAlQASAlIAS,Mechanical Engineer,Project Secretary,Tawke Field“DNO offers oppor-tunities for women.Tolerance andrespect is a rule.”

SAEED KrEET,Camp Boss, Tawke“We have a greatgroup of peoplehere, workingtogether as friends,no matter wherethey come from. Mysalary and work arealso a lot better herethan what I was of-fered when I lived inGermany.”

peopLe in dno

ning. This work, however, has been preparedjointly with the KRG Security Commanderof Dihok Governorate. George Sale of Ardanand KRG Security Officer Mohammed HusseinKhalil are jointly implementing procedures toensure all personnel are looked after. Move-ments of personnel to and from the Tawkefield are supervised by Johan Bergenrupfrom Ardan. Both Mr Sale and Mr Bergenruphave wide military experience from organiza-tions like the UN in the Congo and Indonesia.Their background has prepared them well forunderstanding how to communicate and orga-nize a team of people from different religious,political and cultural backgrounds, many ofthem scarred by war.“Security is a lot more than having check-

points with armed guards,” Mr Bergenrupexplains, “Life here in Kurdistan is half farmingand half military. Every man over 16 years oldcan, and will, handle a weapon. We under-stand them, as we not only have similar expe-rience, but we have also studied their politicaland historical situation and background.Mr Sale and Mr Bergenrup consider the pres-

ent political situation in Kurdistan to be stableand safe for DNO’s activities: “We are adoptingand promoting DNO’s policies throughout theorganization, everything from road safety tomaintenance and garbage handling. It’s goingquite well compared to anywhere else we haveworked. The Kurdish people are easy going andkeen learners,” they conclude.

1. Superintendant at the Tawke oilfield, Thaer Naom works closelywith the local community.

2. George Sale from Ardan moni-tors the security at the oil camp.’Security issues are about a lotmore than check points’, he says.

3. Johan Bergenrup issupervising personnel move-ments to and from the field.

4. KRG Security OfficerMohammed Hussein Khalilis coordinating all securityforces provided by the KRG.

1

2

3 4


ShAring the riSkSAnd the opportunitieSWhen DNO looked for a drilling contractor, Great Wall DrillingCompany took on the challenge. “There are no rewards withoutrisk,” they say, and believe DNO will make fortunes one day.

dno in kurdiStAn


In spite of promising geological data,DNO did not at first find it easy to attractwell service providers willing to work inKurdistan. This has changed today, butthe larger American based service pro-viders like Schlumberger and Halliburtonare still not there. “Both international

and local well service companies have set up busi-ness in Kurdistan and there is now competitionwhich is good for the petroleum sector; OilServbeing the bravest and largest local well servicecompany, has expanded considerably over thepast two years,” says Magne Normann.From his international experience in the oil

industry in many different countries, MagneNormann knows that linking up with the rightcontractors is the key to success. Before joiningDNO, he worked for Smedvig Drilling, a Norwegiandrilling contractor, and before that Mobil and SagaPetroleum. He holds a double MSc; in MechanicalEngineering and Petroleum Engineering.

The challenge“Finding the right service is a challenge in ourbusiness. With the total lack of services withinthe petroleum sector in Kurdistan, our strategywas to identify and attract a drilling contrac-tor that can provide both the drilling and wellservices,” says Mr Normann. CNPC (China Na-tional Petroleum Company) is one of the largestenergy companies of China and the parent ofGreat Wall Drilling Company plus a multitude ofspecialized companies providing well services.A short negotiating period in the summer of2005 resulted in signing of both drilling and wellservices for DNO in Kurdistan.“We were very glad to get the offer to col-

laborate on drilling in Kurdistan. For us, it was a

great challenge we had no hesitation in accept-ing. There is no opportunity without equal risk.If the KRG receives approval from the Govern-ment in Baghdad, DNO will be the biggest inKurdistan, and they will discover more sources,”representatives of Great Wall Drilling Companysay with a smile typical for Chinese who smellfortunes in the distance.

InteractingAfter signing the contract with DNO in the sum-mer of 2005 and some three months of mobiliz-ing equipment and personnel to Kurdistan, theGreat Wall Drilling Company soon had 120 menon site and had the rig ready to spud the firstwell by 28 November the same year. The first well,Tawke #1, was a great success. The well testedcumulative 27,036 barrels per day from two sepa-rate reservoirs. But, by being so fast, what wasthe cost? “We feel that the DNO management isvery good for us. They focus on safety, securityand good communication. If there is any trouble,we can talk eye to eye easily. Besides, they aregood at encouraging the exchange of ideas”, saysthe Chinese. They are also eager to emphasizethe CR strategy of DNO: “Health and safety arekey in all of our operations. Also, to begin with,we had no interaction with the local community.Now the policy is to continuously train locals toreplace our Chinese staff,” they say.

No fussFor the Chinese, friendship in business is impor-tant. “The DNO management shares knowledge,and is very friendly,” they say, smiling. Theirmost friendly man in DNO is Charley Dunn,who is DNO’s drilling manager, and their link tovarious well service providers. Charley joined

DNO in 1999 in Yemen, then worked for DNO inMozambique in 2004 and now Kurdistan. But hisbase is in Dubai, where the Great Wall DrillingCompany has set up its regional head office. MrDunn has a petroleum engineering degree fromMississippi State University, and is a real Ameri-can southerner with a relaxed attitude. “Myjob is below ground. What’s above the grounddoesn’t concern me as long as it runs,” he sayswith his smooth-as-oil southern accent. “My jobis to make things run smoothly, and DNO fits melike a glove. It’s an informal organization wherethe motto is ‘Let’s do it’, with the minimumamount of fuss in a no-nonsense way. The onlybig problem here is Magne Normann,” he says,and laughs out loud, as Magne pops his headround the door, eavesdropping. They’ve knowneach other for ages and work together like twoeccentric uncles playing chess.

remote and aloneDrilling for oil is not all about the right equip-ment. It is about interacting with a team thateats, sleeps and work together for weeks ormonths, in remote areas. “You know, all theeasy places were taken first, long time ago.Now only the remote places are left to explore,that’s why. And Kurdistan was very remotewhen we first started. There was nothing therewithin the drilling sector. We had to set all thatup on our own. No service company would goin at first, but now that we have showed theway, they all come!”Charley Dunn himself is also coming back

to DNO for whatever project they might needhim for: “They pay well and take care of you. Iwouldn’t come back unless I was treated well”he explains with a smile.

||no service companywould go in at first, but now thatwehave showed theway, they all come! Charleydunn

1. Charley Dunn makessure all operationsbelow ground runsmoothly.

2. The DNO manage-ment encourages theexchange of ideas,says representativesfrom Great Wall Drill-ing Company

1 2


||Wewill be able to supply the need of cleanwater for the next twenty years.


In Dohuk, near the Tawke oilfield, Gover-nor Tamer Kocher is very pleased withthe way the Ministry of Internal Affairshas allocated sufficient funds to meethis city’s needs. DNO will support awater purification project in DohukGovernorate with USD 150 million as

part of the Company’s obligation under its con-tract with the KRG. “We give priority to waterpurification, the upgrading of health centers andthe construction of schools,” says the Governor,who is very pleased to welcome DNO to his of-fices in the center of Dohuk city.

20 years aheadThe water project’s first of two phases has beencompleted by a Turkish contractor. How will itbenefit the inhabitants? “New pipelines havebeen installed from the Tigris river to the cityof Dohuk. Large purification plants are built tocomply with international standards to ensureclean water. So far, we have completed the firststage, which supplies 4,000 cubic meters ofwater per hour. Phase two will be completed atthe end of 2010 and will add an additional 6,000cubic meters per hour, and when we reach thatlevel we will be able to supply the need of cleanwater for the next twenty years,” he says. Untilnow the city is relying on water from a nearbylake close to the city itself.

Cholera and other epidemic diseases have haunted theKurdish population. Thanks to financial support fromDNO and other international sources, water supply linesare renewed and purification plants are built.

WatEr&WomEn

dno in kurdiStAn

Dr Avin Maroof,a doctor at thebiggest generalhospital in Erbil.

Governor Tamer Kocher.


To rely on open water sources is risky in Kurd-istan. Three years ago, a serious outbreak ofcholera hit the Kurdish capital’s population of900,000. “A sewage pipe in an overcrowdedsuburb for internally displaced people broke,causing contaminated water to mix with ourdrinking water supply from elsewhere like theGreater Zab River.” Dr Avin Maroof, a doctor atthe biggest general hospital in Erbil, and a mem-ber of the Ministry of Health, explains.KRG somehow managed to get the situation

under control and the newly established Direc-torate of Environment and the Department ofPrevention in the Directorate of Health are nowfocused on pollution and epidemic diseases,often transmitted from sheep through yoghurtand cheese, both of which constitute a majorpart of the local diet.

No equipmentIn spite of its efforts, the KRG lacks a budget tocover extensive maintenance and equipmentwithin the health sector. After working as a doctorfor three years in Germany, Dr Avin knows how tocompare the country’s health institutions by Euro-pean standards: “Our main problem is not the lackof knowledge, but rather the lack of equipment.Today, for example, our X-ray machine brokedown, and it’s the only one we have. In addition,our equipment is outdated. It’s also hard for us toattend international conferences, which is vital forkeeping up to date on the latest developments inmedical science.” Dr Avin is not afraid to voice herconcerns or to complain whenever she finds faultat her workplace: “Someone has to speak up andget things improved,” she smiles.

Helping hospitalsThe DNO management in Erbil is among herlistening supporters. “They are one of thecompanies who actually make an effort. Theyhave the power and awareness to do it. Theyhave provided equipment to the hospitals andin Tawke they did a lot for the local villageafter conducting a survey to identify the vil-lage’s needs. They don’t close their eyes whenthey see problems that are not related to theirspecific business. On the contrary, they show agenuine environmental awareness. That is veryhumanitarian,” she smiles.

Female powerAs a powerful woman in a man’s world, she isan active feminist as well, and part of the localWomen Empowerment Organization. “We’rea non-governmental and independent groupwhich aims at increasing women’s abilities anddecision-making power in society. I also likeDNO for their willingness to hire and promotewomen in their organization,” she says.Scala Aziz Alqasalias is one of the local

women climbing the career ladder in DNO.She is a mechanical engineer, a graduate ofSalahaddin University, and currently working asa project engineer. “A lot of foreign companiesbring their own people out to run their officeshere. DNO not only hires local men, but localwomen too. I am given full support and oppor-tunities to advance,” she says happily. “One dayshe may be the boss – seriously,” says MagneNormann, visiting the office from Dubai, whowould like to see more women take partin their future success.

1. Scala Aziz Alqasaliasis one of the local

women climbing thecareer ladder in DNO.

2. The Kurdistan regionis called the bread bas-

ket of Iraq and offersa variable produce offruits and vegetables.

dno in kurdiStAn

1 2


||A lot of foreign companies bring their ownpeople out to run their offices here.dnonot only hires localmen, but localwomen, too. ScalaAzizAlqasalias


In the small village numbering barely 30 families,life goes on as it has done for thousands of years.They attend to their sheep, chickens and childrenamongst green hills and gleaming oil.He sits cross-legged in his spacious reception

room, where the village men and we are servedwith sweet tea and good conversation. The view isto die for, towards snow-capped mountains in the

distance. In the foreground, rolling green hills dotted withflocks of sheep. What is new is the fact that we are sittinghere, a female journalist, a photographer and a group of man-agers from their new neighbors, the DNO oil company. “Weare grateful for the water, the road, new jobs and the com-pensation for our lost pastures,” the chief says, but adds thathe would liked to have seen more money coming his way, es-pecially in the past two years. The chief is already consideredto be quite wealthy compared to his ancestors. Some of theold brick and mud houses are replaced with modern concretebuildings. Rooms are adorned with ceramic tiles, large mirrorsand equipped with modern baths and toilet facilities.The women are busy preparing a Kurdish feast in the

kitchen. We move from the reception room to the diningroom. Luckily, western eating habits have not yet reachedtheir cuisine, which is our new idea of a gourmet meal.Organic, healthy and wholesome home-made food, richin color and taste are served with all of us sitting on softcushions on the floor.The women join us later, at our request. The men help them

clear away the leftovers, which are served to the children andwomen in the kitchen. To our European eyes, they are notequal to men, and we venture to ask them if they think thepresence of the oil company would also bring feminism totheir lives. Our interpreter thinks the question is quite daringin front of a few village men, but the women seize the oppor-tunity to express their thoughts. “We love to meet foreigners.It’s exciting for us. We like to hear your ideas and learn fromthem, and yes, our role in society has changed a lot the lastyears. We still have a long way to go, but step by step, wego forward. Now we can eat with the men and join themwhen they go to the city,” says the eldest of them. The youngteenage girls tell us they are happy, too: “We want to learnEnglish,” they say, “But our education was interrupted. Thereare not enough schools for our age group,” they add.DNO has provided school materials for the small village

school, but that is far from solving all of their problems:“There are so many remote and tiny villages in the KurdistanRegion. They all need a local school, so we are working onit. Saddam Hussein burned down most of our educationalinstitutions, libraries and book shops,” explains MohammedHussein Khalid, a KRG security officer working with DNO.The oldest villagers have been through tough times. The chieftells us he has fled five times with his people to the moun-tains to seek shelter from violent invaders. The security isvery good now. “Peace is the greatest gift,” he concludes. Theopportunities that DNO now bring to his land is maybe thebest of all the changes he have seen in the recent past.

oil is nothing new to the tawke village chief. not far

from his doorstep crude oil seeps out from the hidden

depths where oil have been accumulating for millions

of years and leaks to the surface and runs down the

gentle hills in a black, rainbow-colored streams.

goodneighBorS

1

dno in kurdiStAn


||Weare grateful for thewater, the road, new jobsand the compensation for our lost pastures.

1. Chief of the Tawkevillage is grateful for thebenefits of having an oilcompany as their closeneighbor.

2. “We love to meetforeigners. It’s excitingfor us”, say the localvillage women.

3. The village kids getschool material fromDNO, among other gifts.

4. Oil seeps up fromunderground basins,a rare geologicalphenomenon.

2 3

4


frOm field tO market

03 cEyHAN – TUrKEy

The Iraq/Turkey pipelines are 40” and 46” respectively and are ableto flow up to 1.5 million bopd from Iraq oil fields to the coastal terminalat Ceyhan. The State Oil Marketing Organization (SOMO) is managing allinternational sales of crude oil from Iraq at present.Ceyhan has become a hub for international crude oil distribution by seatransport to Europe and the USA. The terminal contains seven storagetanks, a jetty capable of loading two tankers of up to 300,000 metric tonsdeadweight (DWT) simultaneously, metering facilities, a waste water treat-ment plant and vapour incineration (“burn-off”) facilities.

HOW ITWOrKSFollow the crude oil fromthe Tawke field to the market.


01TAWKE

The Tawke Oil Field is located near the city of Zakho near the border withTurkey towards the eastern part of the Tawke PSC agreement area. The drillingof the Tawke discovery well led to the planning of field development, earlyproduction and sales of crude oil. DNO acquired a pre-built process plant fromthe USA with a capacity of 50,000 bopd. This Central Processing Facility (CPF)is processing crude oil delivered by multiple flow lines from the individual wellsdrilled. Processed crude oil is then transported via a dedicated 12” by 43 kmlong export pipe line from the CPF to a connecting point with the two Iraq/Turkey pipe lines at Fishkhabour for further export to Ceyhan in Turkey.

02 FISHKAbOUr

Fishkhabour tie-in facilities are located about 10 km from the boarderwith Turkey and Syria. The Fishkhabour tie-in facilities are operated byboth North Oil Company (administered by Federal Government) and DNO.The tie-in facilities include fiscal meters to enable fiscal measurements ofthe crude oil delivered from Tawke. The DNO operated facilities have theability to store 140,000 bbls in two large storage tanks. The facilities arefurthermore designed as a hub to receive crude oil from other new fieldsin Kurdistan. Road tanker loading facility with capacity of 40,000 bopd isinstalled at Fishkhabour for easy access to the local market.


They are a small and independent company with a recordimage of striking oil and gaining revenues in a ratherpolitically unstable region of the world.

transparEnttransactions

CorporAte governAnCe

DNO 2010 // Portraits 39

In Dubai, DNO’s MiddleEast office has a greatview to and goodconnections with theinternational bankingand finance centers.


Haakon Sandborg, DNO’s ChiefFinancial Officer (CFO), isproud of his professionalstaff of financial officersthat also function as internalauditors. They are not afraidto open any files or booksto prove their compliancewith all applicable rules andregulations. “Being a publicly

listed company requires close follow up and reporting to themarket and this is an important and time consuming task ofmy team in Oslo”, says Mr Sandborg.

The man“We had recruited our Financial Controller for our Dubaioffice from India in November 2006” says Magne Normann,Managing Director of DNO Iraq AS. The interviews of recruit-ment candidates took place in Mumbai, and Vinay Lakhotiawas one of them; the last to be interviewed. But Mr Lakhotiaturned up half an hour late, directly from Delhi, where hehad managed to catch the last plane when a friend tippedhim off about the job. In spite of being late, it took him only15 minutes to convince DNO that he was the best of the fivecandidates being interviewed. Mr Lakhotia was offered thejob. With 11 years of work experience with a service providerin the oil industry, he had a background that suited the posi-tion in DNO. But Mr Lakhotia is a man who never makes rashdecisions, and asked for time to think it over. After all, theposition meant moving to Dubai.“I’ve never regretted it,” he says, sitting behind his desk, which

is in such order that you wonder if even the dust has its owndesignated area.“I am very happy here, both with the job, mycolleagues and living conditions,” he says with a broad smile,and “DNO Financial Controller” printed on his business card.

Separate handsHe admits that everything in his life is in such order now thathe sometimes has to rearrange his desk, take another routeto work, or see a movie he normally would not see, just tomake a stir: “It sharpens the brain,” he says, smiling.When it comes to his financial responsibilities and account-

ing procedures, there is no playing around: “Fraud is mostlikely in bank funds, linked to wrong payments or manipulatednumbers. We have procedures to prevent any form of misap-propriation or wrong payments. For instance, no paymentscan be made without the approval of two signatories. In otherwords, the person with the account creating the payment isnot the same as the person approving the payment.

Golden contractsOne of the most important documents in the oil businessis the PSC, the Production Sharing Contract. This is thedocument that states the sharing of responsibility, risk andrevenues linked to oil findings and production betweenDNO and the government.“There are tons of documents linked to the PSC, like pro-

curements. The procurement tenders have to be evaluatedby a financial and technical committee and approved by amanagement committee consisting of representatives of thelocal government and the license holder,” says Mr Lakhotia.At the moment, Mr Lakhotia is doing the accounting, cost

||When it comes to placing orders, we always demand at leastthree bids from threedifferent vendors. hemin ibrahimAhmed

CorporAte governAnCe


control, reporting and budgeting based on data from dif-ferent teams involved in drilling, production and project ad-ministration. ”When the terrain is difficult, it’s a challenge toforesee the amount of equipment, geological strategies andpeople needed,” he explains. But so far he has done a greatjob, according to his cost-conscious management.

close monitoringWhen it comes to procurement within the energy sector, itmeans at times large international services contracts as wellas local service contracts dealing with tribal service providers.All major contracts are managed from the head office ofDNO Iraq AS in Dubai.Besides, Iraq – like Yemen – is a society based on tribal

hierarchies. When we ask DNO’s Erbil based local Logistics andProcurement Manager, Hemin Ibrahim Ahmed, how he managesthis, he sees no problem: “The tribal structure is not a problem.When it comes to placing orders, we always demand at leastthree bids from three different vendors. In addition there arevery strict rules in DNO with regard to limitations of value andapprovals when procuring equipment and/or services”.In addition to the procurement principles, Mr Ahmed needs

to receive an approved request with full specification from therequestor; typically the project department. His greatest pas-sion, besides managing the procurement function, is keepingup with the history of his heritage and the Kurdistan region.After all, he was born and raised in the cradle of Western civili-zation, and decorates his office with archeological photos, ar-tifacts and a blackboard with his own notes. He is interested inhistory and other ancient cultures. Mr Ahmed is a well knownsinger of local songs; he has even had TV appearances.

1. Dubai is a popular placeto work, and DNO’s officehas an attractive location inMedia City, a major businessand pleasure hub.

2. CFO HaakonSandborg is proud of hisprofessional team.

3. It’s extremely importantto monitor every purchase,says Logistic and Procure-ment Manager HeminIbrahim Ahmed.

4. We have proceduresto prevent any form ofmisappropriation or wrongpayments, says FinanceController Vinay Lakhotia.

4

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42 PEOPlE& /V/ DNO 2010

reSponSiBLe ACtionSCorporate responsibility is an attitude. A company that cares abouttheir ethics, employees and the environment will benefit in the long run.

CorporAte reSponSiBiLitY


To be ethical is no longer justan extra cost, but a formal-ized requirement and expec-tation. If a company is caughtcausing environmental harmor violating internationalbusiness ethics, it will have

devastating effects on the Company’s stockvalues and important business rankings.

New standardsThe global financial market and society at largehave strengthened requirements for ethicalstandards since early 2000, due for the mostpart to the Enron scandal and others thatfollowed in its wake. As a consequence, newregulations and legislation were enforced toexpand the reliability of financial reporting bypublic companies. Media attention and rankinglists are putting companies all over the globeunder a new light. But international guidelinesand requirements were not specified until 2005-2006. “That was when we started to work sys-tematically with our team leaders to establisha corporate standard of ethics and other corevalues,” says Ole-Andreas Isdahl, QHSE (Quality,Health, Safety and Environment) Executive.Today, guidelines are no longer enough for

leading investors. Major fund managers arepushing for international standards and want torank companies accordingly. The first CR stan-dards will be published by the ISO during 2010as ISO 2600, and will be voluntary to use. It willnot, however, include requirements, and will

therefore not be a certification standard. Never-theless, DNO is continuously working to improveits ethics, and participates in conferences andforums aimed at expanding the knowledge ofCR in every business and market.“There are many different groups out there, and

so far we closely follow EITI (Extractive IndustriesTransparency Initiatives), CDP (Carbon DisclosureProject), Transparency International, OECD’sguidelines and Norwegian accounting and cor-ruption laws. There is a jungle of mechanismsout there trying to influence guidelines and newstandards,” says Isdahl, who spends a lot of histime just trying to gain the necessary overview.

PreparedBut when the international CR standards are set,how will they affect DNO? “Corporate gover-nance, risk management and robust businessmanagement systems have always been a naturalpart of our leadership style, perhaps becausethey are based on Norwegian social democraticvalues. However, we are continually expandingour knowledge and understanding within thisfield. Competence development, system develop-ment, commitment, implementation, compliance,monitoring and reporting are all key elements tosuccess. We have to know in detail the contentsof relevant standards, the anti-corruption law, pe-nal code, relevant white papers and the comingISO standard in a way which demonstrates thatwe are in compliance. It’s no longer enough justto show good old manners,” he answers.Isdahl is more than willing to show exactly

what they do bylisting the differentprocedures DNOhas implemented.Based on updatedknowledge, theyhave developed asystem for routines,monitoring and re-porting which theycommunicate overthe intranet and the

internet. “Our greatest challenge is to build upthe logistics and communicate the importanceof following these regulations throughout themulticultural levels of our organization. Partsof our company lack the knowledge – andtherefore the capability – to implement newstandards,” he explains.

HumbleAdmitting their weaknesses is an important partof their ethics. Isdahl explains why: “Since CR is avery complex and new area for many, we have totake it step by step in order to develop organiza-tional competence and capacity. Besides, it is notabout us alone. Oil exploration and production istripartite cooperation between the oil companies,the local authorities and the interest groups. Theweaknesses of and potential for improvementhave to be identified and acknowledged by allparties. We are doing our best to accelerate this,but it takes time to build a company profile withinCR, and we learn as we go forward,” he says.

Ole-Andreas Isdahl,QHSE Executive.


Arock may look like a pieceof dead and hard materialto most of us, but for StåleMonstad, Chief Geologist inDNO International ASA, a rockcan tell a story that may be

a billion years old. Besides, a rock is not alwaysjust a rock: “Rock consists of minerals, and min-erals consists of elements,” says Ståle Monstad,who is particularly fond of granite. There aremany different types of granite, but his affectionstems from his childhood among polished anddramatic granite formations in Bergen, where hetook his master’s degree in sedimentology andsequence stratigraphy.

land-based funThe Norwegian city of Bergen is a famous for itsspectacular location between the oil-rich NorthSea to the west and the mountain peaks to theeast. DNO is not operating in the North Seaanymore; a fact which, from a geologist’s pointof view, is great. “Oil finds below the ocean floorare a lot of hassle. We can’t see the reservoirsand have to rely on remote sensing data alone.Land-based oil exploration is a lot more fun,since we can use a lot of different approachesand tools in our investigations,” he explains.Oil finds are based on geological understand-ing. That is why DNO has focused on makinggeology its core field of competence.In Oslo, 15 highly competent geologists and

geophysicists are studying maps, rock sample

analyses, seismic data, well data and the resultsof electromagnetic searches by helicopters.They even study Google Earth photos. Butanalyzing data using computer technology isjust one part of their job. They also trek highmountains, deserts and jungles on expeditionsthat resemble a new Indiana Jones film morethan just another day at work. Mozambique issuch a place, where Ståle Monstad has person-ally visited remote areas to explore DNO’s vast15,000 square kilometer license block. “We takesoil and rock samples, and even use our noses tosmell for hydrocarbon seeps,” he says.What they look for in rock samples are far

removed from the solid granite of his childhood.The more porous the rock, the more likely theyare to hold oil that has seeped up from sourcerock several kilometers below. The oil and gasthen has to be trapped in certain rock forma-tions such as anticlines. The Tawke Field in theKurdistan Region is a very typical example of ananticline,” says Ståle.

creative processOnce all the data has been gathered, the geolo-gists move from an academic and rational stateto a highly imaginative and creative process.We try to reconstruct the area as it may haveevolved over millions of years. We draw mapsof long-lost rivers, lakes, forests and mountainsand of how these have moved and changed.”Ståle eagerly shows how a mountain shape isthe result of slow movements of earth plates,

causing extreme pressure deep down, where sed-iments of organic material from previous oceansend up as a boiling witches brew: crude oil.

moving in?When there are signs of oil reservoirs beneaththe ground, they consider drilling. But drillingmeans moving in with crews and equipment,which in turn demands infrastructure for bothtransport and communication. “Sometimes, likein Mozambique, even a bottle of drinking wateris almost impossible to find at this stage,” saysStåle, and shows photos from his last expeditionshowing primitive tents in a swamp, dirt roads,shacks, and endless stretches of wilderness. “Animportant part of the exploration stage is tomap out the local environment and resources.We do this not only for our own benefit butalso from a CR (corporate responsibility) pointof view. It’s vital that we operate in accordancewith a sustainable future for both the localcommunitiess and the natural environment,”he explains.Since joining DNO in 2004, Ståle has

worked with all the Company’s licenses andis responsible for geological quality. Africa isStåle’s fourth continent, and the most excit-ing one: “Everything is new to me. Every daybrings a new development. Africa has a specialeffect on visitors because it has a specialatmosphere and pulse. I love my job,” he says,with a broad smile and eyes that glitter like anewly-discovered oil well.

roCk AndoiLthe face of mother Earth reveals her soul. for those who can read her wrinkles

and fine lines, she can no longer keep her hidden oil sources a secret.

tHe geOlOgist


||We take soil and rock samples, and even useour noses to smell for hydrocarbon seeps.

Chief geologist, dno internationalASA, responsible for the geologicalquality of exploration projects

Favorite rock: Granite, because itis both hard and fractured, formingdramatic formations.

most exciting work place:Mozambique at the moment.It’s a very young rift area, maybeonly three million years old.

Work tools: Nose, hammer,PC, helicopter and hands.

StåLe MonStAd (46)

Walking throughdense tropical forestin Mozambique.

Studying theoutcroppinglimestones, Tawkearea Kurdistan.


the treASure CheStThe wells operated by DNO in Yemen currently provide theCompany’s main cash flow. Yemen has a long historyof developing its rich resources.

dno in YeMen


||operating in these areas can be quitechallenging. Sven erik Lie


dno in YeMen

||Yemen is a good example of howwe are prepared to bea proactive and an efficient operator. tore Lilloe-olsen


dno in YeMen

DNO’s history in Yemendates back to 1998, whenDNO took over as operatorof the Tasour field afterClyde Expro Plc Yemen. Atthat time, Clyde, Norwe-gian Hydro AS and Oranje

Nassau BV had decided to withdraw from theblock, as they considered the reserves to be toosmall to justify economic development. By endof 2000, DNO had brought the Tasour field intoproduction, and since then, five additional fieldshave been brought into production within a yearof their discovery: Sharyoof, Nabrajah, Godah,Bayoot and Hekma. DNO would agree with theRomans, who in 26 BC named the fertile countrythey found Arabia Felix (rich, fertile Arabia).“Yemen is a good example of how we are pre-

pared to be a proactive and an efficient operator,using the minimum level of resources and takingsmall steps to build up competence and tech-nology as required. Besides, our small teamsoperating in remote areas are able to move fromexploration to production with a minimum ofhandover and thus loss of momentum,” saysTore Lilloe-Olsen, Corporate Head of Exploration.

joint partnersMr Lilloe-Olsen would be applauded by theRomans, who – unlike DNO – were defeated.

DNO is highly acclaimed as a joint venturepartner contributing to the country’s wealth; theProduction Sharing Agreements (PSAs) entitleYemen to a substantial part of the oil revenues.“Our policy is to always be the operator in a joint

operation, based on a PSA with the local authori-ties, entitling them to more than 70 percent of theprofit,” says Sven Erik Lie, Managing Director ofDNO Yemen. “We were lucky to strike oil and geta substantial amount of production within recordtime,” he adds. It is therefore not surprising thatDNO’s reputation as an efficient operator hasbeen very good since their successful start.

Tribes and controlToday DNO operates about 70 wells distributedamong four blocks in the eastern part of thecountry in the Hadramawt Governorate, anarea famous also for its historical and culturalvalue. The wells are situated on high mountainplateaus, creating an impressive sight, but withequally difficult infrastructure.“Operating in these areas can be quite chal-

lenging, especially for newcomers. However, ourstaff have extensive knowledge and experiencein all our operations, including seismic acquisi-tion, drilling and production,” says Colin Kramer,General Manager for DNO Yemen AS. The staffhe refers is to the large number of locals who inone way or another are involved in DNO’s opera-

tions. “The areas are inhabited by local tribes,who benefit considerably from the infrastructure,compensation and job opportunities in the wakeof DNO’s operations. In addition to our explora-tion and production activities, we also exportthe crude through the export facilities that areoperated by Canadian Nexen Petroleum Yemenon behalf of the government. DNO and its part-ners have crude sales agreements with NexenMarketing,” he adds.

mutual trust and cooperationAfter the authorities have taken their share ofthe crude, DNO and partners have split their reve-nues, DNO are left with some eight to ten millionUS dollars per month. “Yemen is a relatively easymarket for us. Since we started up over ten yearsago, the same people have been working for us.This is to a large extent also the case with theauthorities and our partners. As a consequence,we have developed a mutual trust and coopera-tion with the authorities and our partners, whichbenefits our operations.” Mr Lie explains.DNO has about 260 people employed in Ye-

men, 95% of which consists of local employees,in accordance with the national law of Yemeni-zation. Yemen’s government has adopted aprogram to Yemenize its oil sector, claiming it isan important step on the road to implementingthe strategy to limit poverty and unemployment.

||Wewere lucky to strike oil and get a substantial amountof productionwithin record time. Sven erik Lie


Lack of education is, however, still a bigproblem in Yemen, and the symptom of adeeper conflict. It is, after all, a country rich innatural resources. “For most people, Yemen isperceived to be an unknown and dangeroustribal area and a cradle of terrorism,” says Mr Lie.However, DNO has always been on good termswith both the authorities and the tribes in thepeaceful area in which it operates. The presenceof foreign companies has little impact on orsignificance for the ongoing conflicts.“None of the conflicts in Yemen are new, and

they have had limited impact on our operations.However, we do take all the necessary precau-tions to keep our personnel and operationssafe,” says Mr Kramer.

Fascinating and mysticalBut Yemen is not just about oil and politicalturmoil; it is also a fascinating country which fewpeople get to know. For the casual tourist it is ahaven of ancient history, architectural gems andwarmhearted welcomes.From almost tropical sea to green hills and

barren mountains, Yemen has great naturalbeauty. The mountainous countryside is a geo-logical and trekking paradise, with altitudes over3,000 meters above sea level. Tiny villages seemto grow straight out of the rocky, gold-coloredmountains. This is where the Silk Road caravans

would stop on their way to Jordan, leavingbehind wealth, art and knowledge.Yemen is part of the Arabian Plate. The Arabian

Shield became welded onto the African Shield bya plate collision in late Precambrian era. An exten-sive marine platform developed on the northeast-ern flank of the shield during the Paleozoic–Me-sozoic eras. This platform built into the Tethyanseaway, and during late Jurassic period a uniquecombination of conditions resulted in the Arab OilSystem. These included high organic productiv-ity, repeated regressive shoal conditions, anoxiclagoonal oil source rocks and evaporitic seals.

Queen of ShebaLife is still very medieval in Yemen. The atmo-sphere at night is magical, in the absence ofneon lights and western entertainment. Waterpipes, khat chewing, conversation and longmeals in the light of softly lit lanterns, thesound of haunting and melancholic oud musictakes you back to a forgotten way of life.The Yemenites themselves are extremely

welcoming, and curious about foreigners. Formany, the presence of foreign companies is anescape from a lifestyle that offers little but pov-erty and insecurity about the future. Accordingto new archeological findings in Marib, Yemenwas once the promised land of the Queen ofSheba. Now its future wealth relies on oil.

the republic of Yemen is located on theArabian peninsula in Southwest Asia. it has anestimated population of more than 23 millionpeople. More than half of the population isunder fifteen years of age.

Yemen’s economy depends heavily on the oilit produces, and its government receives the vastmajority of its revenue from oil taxes. But Yemen’soil reserves are expected to be depleted by 2017,with fears of a resulting economic collapse. Yemendoes have large proven reserves of natural gas.

dno’s history in Yemen dates back to 1998,when they took over as operator of the Tasour fieldafter Clyde Expro Plc Yemen.

By end of year 2000, DNO brought the Tasourfield on production, and since then, five additionalfields have been brought on production within ayear of discovery. Today, they operate about 70wells distributed amongst four blocks in the easternpart of the country in the Hadramawt Governorate.

dno has about 260 people employed in Ye-men, whereas 95 % locals, in accordance with thenational law of Yemenization.

dno in YeMen

1. DNO has produceda substantial amountof oil in Yemen sinceyear 2000.

2. Sven Erik Lie,Managing Directorof DNO Yemen AS, isexpecting an increasein production for awhile more.

1 2


hiStorY – the quiCk verSion

the Beginningit is 6 august, 1971. crown prince Harald of norway attends the

founding ceremony of dno, one of the first small oil companies that

started off the norwegian oil era by qualifying for participation on

the norwegian continental shelf (ncs). the owners were

44,000 stockholders among the norwegian people.

the hiStorY of dno

1971DNO was foundedunder the name DetNorske Oljeselskap ASto engage in petroleumexploration andproduction activities. Itwas the first Norwegianoil company to belisted on the OsloStock Exchange.

1974Initial revenuesgenerated fromoil productionthrough a 6.25percent work-ing interest inthe Heatherfield in UKsector of theNorth Sea.

1984DNO was one offour Norwegiancompanies tobe awardedlicenseinterests onthe Norwegianshelf by theNorwegianparliament.

1991The Companysold all its petro-leum licenses, andin order to appearas a pure invest-ment companythe Companychanged its nameto DNO AS.

1995A fluctuatingmarket resultedin short-termstrategies andsignificantdownsizing of theorganisation. TheCompany hadthree employees.

1996New BOD and managementteam implemented strategyof focusing on the develop-ment of small oil fields andtail-end production.Pursuant to the new EUregulations for Public Lim-ited companies in 1996; theCompany changed its namefrom DNO AS to DNO ASA.


1997DNO becamefield operatoron UK sectorof the NorthSea.

1998DNO acquired workinginterest for the first timein onshore oil fields inYemen.

2000The presence in theNorwegian sector of theNorth Sea was re-estab-lished and DNO acquiredworking interests in theJotun and Glitne fields,and the PL 203 license.The Company made anoil discovery in Yemen(Sharyoof).

2002Received approval to act asoperator in the NorwegianContinental Shelf (NCS).Acquired 99 percent work-ing interest and becameoperator on the Thistlefield in UK and acquiredand commenced develop-ment on Seven Heads gasfield in Ireland.

1971was the year when oilproduction started inthe North Sea, and

this oil adventure has made Norway one of therichest countries in the world.

PositioningIn that milestone year, the founders of DNOconsisted of a group of shipowners and indus-trial leaders led by two renowned men: JacobStolt-Nielsen and Jan Erik Dyvi. A widespreadstock equity of NOK 43 million was used to buildup the Company, which started off on the Britishcontinental shelf to gain experience while wait-ing for the third round of concessions expectedin 1973. It found solid and experienced partnersin Union Oil and Skelly, who would carry themthrough the exploration phase.

InternationalDNO’s first four licenses came in 1972 for theHeather Block in the UK, which has since beentheir main source of income. In 1998 DNObecame the full owner and operator of thesame block. But DNO wanted more, and in1971 it was also involved in drilling activities,building mini refineries in the US (albeit notvery successfully) and investing in severalrigs in collaboration with the Odfjellgroup and their deep-water rigs.

2003DNO decided toenter into a Sale andPurchase Agreementwith Lundin, for thesale of all of the issuedshare capital of DNO BritainLimited and Island PetroleumDevelopments Limited, and thesale of certain assets in DetNorske Oljeselskap AS.

2004In June, DNO entered into productionsharing agreements(“PSA”) with theKurdistan RegionalGovernment (“KRG”)in Northern Iraq.DNO secured 9 newlicenses in Norwayand Yemen duringthe course of the year.


2005The Company achieved significant reserveadditions at low cost through successfuldrilling in Yemen, and production increasedfrom start- up of Nabrajah field in Yemen.DNO was awarded licenses in Norway and UK.Initial work program started in NorthernIraq by seismic surveys and spudding of firstexploration well.DNO delivered significant value to share-holders through two dividend payments incash and treasury shares.

2007In June, production commenced from the Tawke field in the Kurdistan region of Iraq.The Norwegian subsidiary (NOIL Energy ASA, “NOIL”) was listed at OTC.In July, the first well with DNO as operator on the Norwegian ContinentalShelf was spudded in the Lie prospect in PL 305.New licenses were granted in Norway and Yemen.On October 8, an integration agreement was entered in order to combineNOIL with Pertra ASA (later renamed Det norske oljeselskap ASA; “DETNOR”),creating the second largest Norwegian oil and gas company. Subsequently,DNO reduced its shareholdings in DETNOR to 36.9%.DNO ASA changed its name to DNO International ASA – to emphasisethe difference between Det norske oljeselskap and DNO ASA.

2006An important breakthrough in Northern Iraq wasthe Tawke oil discovery, which was confirmed byour very first exploration well within the area.The office in Dubai was opened – from where theNorthern Iraq operations are managed.Rig capacity for exploration drilling on the NCSwas secured through a 3-year contract togetherwith a consortium of several other companies.DNO participated in a discovery in the Goliat field(PL229) in the Barents Sea – adding significantvolumes to the reserve and resource base.

the hiStorY of dno

||With new owners, management and strategy, dnobegan a new life,often referred to as the first, second and third cycles.

UnwantedDuring 1974 the Company’s financial positionwas solid, but the third round of concessions inNorway, turned out to be a huge disappointment.In spite of its high levels of competence andexperience they had gained, from the UK to theNetherlands, Spain and the US, DNO wasnot given the opportunity to operate on theNorwegian Continental Shelf.

Heavy lossesDNO tried to convince the Norwegian authori-ties that a more flexible attitude towards bothprivate and international participation wouldbenefit the oil industry in the long run. Thisstrategy is almost breaking their neck. In 1977,their operation in the US failed, and the finan-cing of other activities became difficult dueto heavy losses. Moreover, their UK wells wereproducing no more than a fraction of whatwas expected. In 1979 their losses were heavy,and as a consequence the number of staff wasreduced to only five people.

Prices and politicsBetween 1978 and 1980 oil prices sky-rocketedfrom USD 12 to over USD 30 per barrel. Thissaved DNO, which began its battle for a piece ofthe action on the Norwegian Continental Shelf(NCS). A new government was elected in 1981,providing a more amenable attitude towardsprivate initiatives.DNO was given the opportunity to enter NCS,

and was then known as ‘the fourth oil company’.

To make a long story short, DNO became drawnbetween various interests, also internally. Italmost ended with bankruptcy again in 1995-96.Very little was left of their oil activities. Theirstock value, which once reached NOK 445(1973), was down to a mere NOK 5.

New ownersBerge G. Larsen, a Norwegian businessman andat the time Managing Director of Odfjell Drilling,bought 30% of DNO stock for a considerablyreduced price in 1995. He turned the Companyupside down and transformed it into a profes-sional oil company by hiring a highly compe-tent staff and management from within the oilindustry. In 2000 the Company bought its wayinto five licenses on the Norwegian ContinentalShelf and set high production estimates. Theirstrategy was now supported by the NorwegianGovernment, who had by then changed its atti-tude towards small, privately-owned companies.They were no longer looked upon as a threat butrather as a necessity for fully developingthe Norwegian oil industry.

New strategiesWith new owners, management and strategy,DNO began a new life, often referred to as thefirst, second and third cycles. It began by divest-ing the old investments made between 1996 and2003. They capitalized on their strong positionin the UK and Norwegian sectors of the NorthSea, where the strategy had been to focus ondeveloping small oilfields and to increase the

dno’s early history is told by Nils J. Heilemann,a lawyer, who not only managed the companyfor over ten years but who also drafted the firstNorwegian petroleum act. He has also been theVice President of OLF (Oil Industry Association),Secretary General for the Norwegian Oil LicenseesAssociation and a special adviser to the Ministry ofPetroleum and Energy.

dnofACtS


2009In March, the tie-in of the Tawkepipeline to Iraq’s northern pipelinesystem was completed and dno wasready for full-scale production.dno divested 11.9% of dETnoRshares, bringing the total ownershipdown to 25%.on 10 May, dno was given formalnotice by KRG to commence exportfrom the Tawke field.on 1 June, dno started initial export.

2008dno shifted focus from exploration towardsincreased production and near-term development.dno responded to the change in the financialenvironment by initiating measures to reduce in-vestments significantly in the short to medium term.The Tawke Phase 1 development was completedand commenced the remaining work to prepare forfull-scale production from the field.Permanent development of the Bayoot field inYemen was initiated with expected completion atthe end of 2009.

recovery rates from mature fields. The sale oftheir UK company and some of their norwe-gian assets to Lundin Petroleum for noK 1.7billion yielded rich dividends for the Company’sshareholders in 2004 and 2005.

ExplorationSecondly, dno increased its focus on produc-tion to exploration in 2003. They deliveredsignificant reserves at low costs in Yemen andKurdistan. Cash flows from high-margin produc-tion in Yemen financed a significant part of theinvestments. dno restructured its activities onthe norwegian Continental Shelf, generating anet gain of noK 871 million.

Det norske oljeselskapIn november 2007, the Company decidedto combine their activities in the north Seawith Pertra ASA (now known as det norskeoljeselskap ASA (dETnoR)), creating thesecond largest oil and gas company in norway.dno’s shareholdings in dETnoR are currentlyat 11.66%. Activities outside of the norwegianContinental Shelf are carried out by dnoInternational ASA.

Increased productiondno is now in its third cycle, focused on build-ing a strong position in low-cost, high-potentialareas and increasing production capacity froma large developed reserve base. It will continueto grow both organically and through activeparticipation in consolidation opportunities.

content

||we see opportunities where others see threats, and this was particularlythe casewhenwe entered kurdistan in 2004. helge eide

2 PEOPlE& // dno 2010

LicensetodriLL

fLowatthetawkefieLd

DNO is the pioneer oil company thatventures where others hesitate

Superintendant Thaer Naomis ready to export oil from

the Kurdistan region of Iraq

PeoPLe&Projectsa dno magazine

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central processing facility

sven erik lie

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attracting service providers

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