Shell, Iraq close to agreeing $11bn petchem complex contract

DUBAI (ICIS)–Iraq’s government is set to finalise a contract with oil and gas giant Royal Dutch Shell for the construction of an $11bn (€8bn) petrochemicals facility in the south of the country, a government statement issued late on Tuesday said.

The announcement to move forward with the proposed complex follows a meeting between Iraqi Prime Minister Nouri al-Maliki and Shell CEO Peter Voser in Baghdad.

“Shell CEO revealed that his company is all set to sign an investment contract with the Iraqi Oil ministry to create a giant petrochemical plant with a total cost of up to $11bn and believed that it would be ready to sign within weeks,” the statement said.

Iraq had signed a memorandum of understanding with Anglo-Dutch energy giant to carry out a technical and economic feasibility study toward establishing a petrochemicals plant.

The project envisions an ethane-cracking unit that would produce ethylene, a compound used in making plastic.

Al-Maliki expressed his government’s support to companies operating in Iraq, including Shell, so that they can complete their projects as soon as possible, it added.

Shell already has a presence in Iraq, where it is developing the huge Majnoon oil field near Basra.

However Iraqi government’s relation with Shell turned sour in July last when its oil ministry blamed the energy giant for over $4.6bn in lost revenue due to production delays at the site.

In a letter to Shell, the ministry says “Iraq continues to suffer losses each day as a result of Shell’s failure to perform its contractual obligations.” 

A consortium of Shell and Malaysia’s Petronas signed a contract with the government to develop Majnoon in January 2010. Shell holds a 45% stake in the project, while Petronas has 30%, and the remainder is held by a state-owned Iraqi firm. 

A Dubai-based banker said latest announcement shows Iraq and Shell have settled their differences.

“It is a good omen for Iraq. The much needed project for Iraq was on paper for quite some time but now it’s a right time to materialise it,” the banker said. 

($1 = €0.74)