Iraq says Chevron, Total want work in giant Majnoon oil field

By Kadhim Ajrash and Khalid Al-Ansary on 10/9/2017

BAGHDAD (Bloomberg) -- Chevron Corp. and Total SA have expressed readiness to help develop Iraq’s giant Majnoon oil field, which Royal Dutch Shell Plc said it wants to quit, according to Iraqi Oil Minister Jabbar al-Luaibi.

Iraq hasn’t started negotiations with Chevron and Total, which have expressed readiness to work on the 200,000-bpd field, al-Luaibi told reporters in Baghdad. Shell hasn’t quit Majnoon and the Iraqi oil ministry is still in talks with the producer, he said. A person familiar with the matter told Bloomberg last month that Chevron was considering buying Shell’s stakes in Majnoon and West Qurna-1 oil fields.

“Until now, we are still in talks with Shell, and no decision has been made in relation to exiting the Majnoon field,” al-Luaibi said. He hopes to “reach a satisfactory deal for the two parties.”

Chevron and Total didn’t immediately respond to requests for comment. Shell said in an emailed statement Monday that Iraq’s oil minister “formally endorsed a recent Shell proposal to pursue an amicable and mutually acceptable release of the Shell interest in Majnoon, with the timeline to be agreed in due course.”

Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, reluctantly agreed in November to participate in production cuts to help end a global oil glut and has vowed to keep expanding capacity to be ready for the end of the deal next year. It pumped about 4.6 MMbpd in December, just before the curbs took effect, and development of West Qurna-1, Halfaya and Zubair oil fields could take the nation toward capacity of 5 MMbpd, according to consultant Wood Mackenzie.

Leaving Majnoon

In the statement on Monday, Shell said it will remain “firmly committed” to natural gas and petrochemical projects in Iraq. “By leaving Majnoon, Shell will be in a stronger position to focus its efforts on the development and growth of the Basrah Gas Company, and the Nebras Petrochemicals Project.”

Shell has a 45% interest in the Majnoon service contract, in which it’s paid a fee for each barrel of oil produced above a certain level until 2030. The company holds a 20% stake in West Qurna-1.

Iraq committed to reduce crude output by 210,000 bpd as part of the global agreement to curb oil production.

The country’s finances have been under severe strain from low oil prices and an expensive armed conflict against Islamic State militants over the past three years. International reserves fell from $54 billion at the end of 2015, to $45 billion at the end of last year, while the government deficit increased to 14% of gross domestic product last year from 12% in 2015, the International Monetary Fund said in August.

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