Shell Operations in Iraq

= History =

Shell first entered Iraq before it was a sovereign country, as part of the Turkish Petroleum Company (predecessor of the Iraq Petroleum Company). The company enjoyed monopoly rights to the country's oil fields and dictated the terms of production and development until 1972, when Iraq fully nationalized its oil sector and expelled the foreign oil companies.

After the U.S.-led invasion in 2003, Shell was among the many international oil firms who returned seeking to explore Iraq's reserves, taking stakes in the West Qurna 1 and Majnoon fields. A 2012 report by Reuters suggested that Shell was exploring the possibility of entering the Kurdistan region, a suggestion denied by government officials. A Shell spokesman said that "over time, we want to work in all of Iraq, but for the time being we've got three mega-projects on the go (in southern Iraq),". According to the report, Shell had come close to securing contracts in the Kurdistan region twice, but pulled back so as not to antagonise the government in Baghdad, which considers contracts signed by the KRG as illegal.

= Activities and Contracts =

West Qurna 1
Following the Iraq's first post-war licensing rounds in 2009, in January 2010 Shell was the junior partner in the consortium that finalised a deal to develop the West Qurna field (Phase 1), after further negotiations with the Iraqi government. The senior partner in the consortium was ExxonMobil. ExxonMobil holds a 60% stake in the project, Shell has 15% and the remaining 25% belongs to the Iraqi state.

Reports by Dow Jones newswire in November 2011 suggested that the Iraqi Oil Ministry might take over Exxon's stake in the field if their contract was terminated by the government as a consequence of the deals its signed with the Kurdistan Regional Government (KRG). As of November 2012 Exxon was progressing with the sale of its West Qurna assets, but it was not yet confirmed who the buyer would be.

Majnoon
In Iraq's second post-war licensing round in 2009, Shell was part of a consortium including Petronas that won the contract to develop the Majnoon oil field. Shell holds a 45% share in the contract, Petronus 30% and an Iraqi state company holds the remaining 25%. The fee was set at $1.39 per barrel and the consortium pledged to increase output from the field to 1.8 million barrels per day (bpd), more than twice what Iraq had expected.

In October 2010, Shell CEO Peter Voser announced that the company had already raised production at the Majnoon field to 70,000 bpd, up from 45,000 bpd previously, however acknowledging that the risk of operating in Iraq had increased in recent months. The company suffered a series of setbacks in the development of the field in achieving a production target of 175,000 bpd, the level required for the company to start recovering costs under its deal with the Iraqi oil ministry.

According to Shell's director of media relations Diego Perez, 2,500 out of 3,000 Shell staff at the Majnoon field in 2012 were Iraqis.

South Gas Utilisation Project
(for further detail please see South Gas Utilisation Project)

In September 2008, Shell signed a Heads of Agreement (HOA) with the Oil Ministry to capture some of the gas flared at Basra in the south, for a project which later came to be known as the 'South Gas Utilisation Project'.

= References =