* Slashes FY production forecast 20 pct to 32,000-36,000 bpd
* Shares down as much as 9 pct, hit lowest since late 2011 (Adds analyst comment, clarifies unauthorised payments made)
BANGALORE/LONDON, Aug 29 (Reuters) - Oil explorer Afren slashed its full-year production forecast by 20 percent on Friday after counting its losses from the shutdown of operations in Iraqi Kurdistan, dragging its shares to their lowest level in more than 2-1/2 years.
The forecast cut came a day after the company suspended two senior employees as part of an investigation into the alleged receipt of unauthorised payments that had already led to the temporary suspension of its chief executive and chief operating officer.
The explorer, which operates in Nigeria and Iraqi Kurdistan, cut its 2014 production outlook to between 32,000 and 36,000 barrels of oil per day (bpd), from an initial forecast of 40,000 bpd.
Afren shut production at its Barda Rash oil field in Kurdistan on Aug. 8 and started evacuating staff due to escalating security risks in the area.
"I'm not going to risk anybody's life for anything. Not one drop of blood for a million barrels," said Egbert Imomoh, Afren's executive chairman, during the presentation of the company's half-year results.
Shares in Afren dropped as much as 9 percent, making them the second-biggest losers in London's FTSE 250 index of mid-sized companies. They traded as low as 90.35 pence, their lowest level since late 2011.
British law firm Willkie Farr & Gallagher is expected to conclude a review next month relating to alleged unauthorised payments linked to three transactions.
Announcing the temporary suspension of the CEO and COO last month, Afren had said the payments were not made by the company.
The current value of the transactions made in 2012 and 2013 is around $135 million, including $93.3 million for an agreement on field extensions related to the Okoro field in Nigeria, Afren said on Friday.
The review also includes $298 million in deferred tax assets related to its Ebok oil field in Nigeria, its main producing asset in which Afren holds a 50 percent stake.
The company gave no further comment on the investigation.
The suspension of the CEO and COO prompted ratings agency Fitch to put Afren on its negative watch list earlier this month until the company concludes the investigation.
Afren said it would restart operations at Barda Rash, which produced an average of 536 bpd over the first half of the year, "as soon as is prudent to do so".
Imomoh added that before production can resume the company will have to go through a lengthy process of re-mobilising some of the rigs at the field.
Afren also said on Friday its net production fell 25 percent to 33,488 bpd over the first half of the year, halving the company's pretax profit to $133 million.
"Weakness in the underlying business is likely to be of secondary concern given the ongoing issues around corporate governance," said Lucas Herrmann, analyst at Deutsche Bank. (Editing by David Holmes and Pravin Char)