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Iraq Says Shell May Not Quit Majnoon Oilfield

Negotiations between Baghdad and Shell regarding the company’s possible exit from the Majnoon oilfield are still continuing, Iraqi Oil Minister Jabbar al-Luiebi said on Sunday. The official added that the government had not yet begun talking about the field’s operation with other companies.

Reports about Shell’s plans to quit its Iraqi oilfields, including the divestiture of its 45-percent stake in the Majnoon field, first appeared last November. The sales were to be part of a wider divestment strategy, prompted by Shell’s acquisition of BG Group, which swelled its debt load.

Back then, Shell was mulling the sale of only its oilfield interests, and was set on keeping its natural gas fields in Iraq. At the Majnoon oilfield, near Basra in southern Iraq, Shell is the operator and holder of 45 percent, with Malaysia’s Petronas owning 30 percent, and Iraq’s Missan Oil Company holding the remaining 25 percent.

The company confirmed the reports earlier this month, saying it had agreed with Baghdad on an "amicable and mutually acceptable release" of its stake in Majnoon. No timeline was specified, and judging by this Sunday’s statement from Al-Luiebi, the release might take some time. Interestingly, Shell started an expansive drilling program earlier this year, aimed at raising the field’s output to 420,000 bpd.

Related: Expect A Major Leap In U.S. Oil Exports

The oilfield started production in 2014 and now produces an average of 210,000 bpd, according to Shell’s website. According to Iraqi oil officials who spoke to Reuters, the current production is around 235,000 bpd. The field’s reserves have been estimated at 38 billion barrels of crude oil, and the initial production plan for maximum output was 1.8 million bpd, at a payment of US$1.39 a barrel for the consortium developing the field.

If Shell quits Majnoon, it will become the first supermajor to pull out of an oilfield project under Iraq’s technical service contract, S&P Platts notes.

By Irina Slav for Oilprice.com

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