Shell to Withdraw From Iraq’s Majnoon Oilfield

Royal Dutch Shell is seeking to sell Iraq’s Majnoon Oilfield and the country’s Oil Ministry has started preparations to finalize its exit, according to a ministry letter and oil officials.

A letter signed by Iraqi Oil Minister Jabar al-Luaibi dated Aug. 23 and addressed to Shell Iraq Petroleum Development gave approval for Shell to quit Majnoon, an oilfield near Basra, which started production in 2014, Reuters reported.

“We respect your desire and decision to seek an acceptable end of Shell Iraq Petroleum Development SIPD’s interest in Majnoon,” the ministry’s letter said, a copy of which was seen by Reuters. SIPD is Shell’s local unit.  Three Iraqi oil officials and an Iraqi senior engineer working with Shell in Majnoon confirmed the letter’s authenticity.

In November, industry sources had told Reuters that Shell was considering selling out of its oilfields in Iraq as part of its global $30 billion asset disposal program.

The officials said the oil ministry and Royal Dutch Shell had been discussing investment budgets and production activities but failed to reach a deal.

“We failed to reach an agreement with Shell over its Majnoon operations, including production plans and investments budgets. We think it is for the interest of all parties that Shell should withdraw,” said an oil official who attended a meeting last month in the ministry to discuss how to manage Majnoon after the withdrawal of Shell.

Shell holds a 45% interest in Majnoon based on a technical service contract that expires in 2030, according to its 2015 annual report. Malaysia’s national oil company Petronas holds a 30% stake in the field while the Iraqi government holds the remaining 25%.

Production from Majnoon is currently at around 235,000 barrels per day, according to Iraq’s oil officials.

Despite the withdrawal from Majnoon, Shell will keep its operations in gas and petrochemical projects in Iraq, the letter said.