Shell hashes out plans for Majnoon oilfield

Companies such as Shell that are developing Iraq’s southern fields are paid in oil that is equivalent to the money they are owed in cost recovery and remuneration fees.

Royal Dutch Shell Group is still in talks with the Iraqi government over production targets for the Majnoon oilfield in southern Iraq, a company official said.

Shell, which has a 45 per cent stake in the field, began production in 2013 and exported the first crude in the first quarter of last year. “Following the successful development of the first phase of Majnoon, taking production to an average of 210,000 bpd, Shell is in discussions with the government on the optimal full-field development plan for Majnoon,” said Hans Nijkamp, the vice president and country chairman for Iraq.

He declined to give a timeline for the talks.

Iraq is holding talks with international oil companies on revised production targets for the southern fields because of the near 45 per cent drop in the price of oil since June last year.

Companies such as Shell that are developing the country’s southern fields are paid in oil that is equivalent to the money they are owed in cost recovery and remuneration fees.

Iraq owes US$9 billion to contractors for last year and is expected to pay about $18bn to investors this year, the International Energy Agency said in its April monthly oil report.

Iraq had initially set an overall production capacity target of 12 million bpd by 2020, which would have competed with the top oil exporter, Saudi Arabia. The initial target was set after Iraq signed service contracts in 2009-10 to develop its southern oilfields. It is expected now to be in the region of 9 million bpd.

Iraq produced 3.6 million bpd at the end of March, according to Opec's April monthly report.

Besides Majnoon, Shell also holds a 20 per cent stake in the southern oilfield of West Qurna 1, which is operated by ExxonMobil of the United States.

In terms of gas, Shell is moving along with its 25-year joint venture with Iraq's state-run South Gas Company to gather, treat and process associated gas from West Qurna 1, Zubair and Rumaila in the south. Shell has a 44 per cent stake in the joint venture, Basrah Gas Company. Japan's Mitsubishi has 5 per cent and the rest is held by South Gas Company. The gas is being fed into power plants to meet the country's rising electricity needs.

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