Shares in Dragon Oil fell yesterday after the company said one of its pipelines in offshore Turkmenistan had become blocked, preventing the distribution of more than a quarter of its normal oil output.
The Dublin-based exploration group said yesterday that a large volume of paraffin wax was blocking one of the pipelines in the LAM field in the Cheleken Contract Area. It said initial attempts to treat the blockage had been unsuccessful and later efforts were inhibited by bad weather and a lack of the necessary equipment.
However, Dragon said it will continue to treat the blockage with chemicals, and lay an alternative pipeline. This is expected to be ready for use in early April.
Dragon's chairman Hussain M Sultan said that, while the discovery of the blockage was disappointing, he was confident the problem would be sorted shortly and that when production recommences, flow rates will be quicker than before.
As of January, Dragon, whose principal asset is a production sharing agreement in the Caspian Sea off the Turkmenistan coast, was producing about 20,000 barrels a day. It is unclear how much the company gets for each barrel of oil, but crude oil has recently been trading on the market at around $60 (€50.4) a barrel. At that price, Dragon could be losing as much as $336,000 a day until the blockage is cleared.
Shares of Dragon recovered slightly to end the day down 4.3 per cen, at €3.30 in Dublin, while in London the stock was down 2.9 per cent at 232.5p.
