* DNO shares suspended by bourse, to resume Thursday
* Kurdish officials suspend DNO activities for 6 weeks
OSLO, Sept 22 (Reuters) - Shares in Norwegian oil producer DNO were suspended on Tuesday and analysts said they could fall sharply when trade resumes after Kurdish officials halted the company's operations in Kurdistan for six weeks.
DNO shares were suspended by the Oslo bourse on Monday and trade will restart on Thursday morning at the request of DNO, which the stock exchange says asked for time "to clarify the situation in Iraq".
The Kurdistan Regional Government (KRG), said in a statement on Monday that an Oslo Stock Exchange statement and subsequent newspaper reports surrounding its involvement in the sale of DNO treasury shares last year had done it "unjustifiable and incalculable harm" and demanded DNO remedy the damages to the KRG's reputation.
Kurdish Energy Minister Ashti Hawrami said in a letter published on DNO's website that if DNO failed to remedy the damages it "may consider termination of DNO's involvement in the Kurdistan region with or without compensation".
"We do not say that this will be the case, and there is a distinct possibility that the troubles will be sorted out," First Securities analyst Are Martin Berntzen said in a note.
"However, we would not recommend buying DNO shares before the two possibilities (confiscation without compensation and with cost pool compensation) are well reflected in market valuation."
DNO was the first western company to drill for oil in Iraq following the U.S.-led invasion. Its western peers in Kurdistan include Heritage Oil and Gulf Keystone.
"We shall see if the matter will eventually be resolved, but the market usually looks at the worst case first," an analyst said, adding DNO shares may drop sharply when trade resumes.
"DNO made all the investments in the Iraqi field and it's probably not in the interest of either party that they lose their investment," added the analyst, who declined to be named.
(Reporting by Wojciech Moskwa; editing by Simon Jessop)