Iraq is pushing seriously to get its Majnoon oil fields back to production as its has received bids from both Chevron and Total to take over the fields following planned exit of Royal Dutch Shell Plc.
Jabbar al-Luaibi. Iraqi oil minister said in a statement released earlier Monday that Chevron Corp. and Total SA have expressed readiness to help develop Iraq’s 200,000-barrel-a-day Majnoon oil field, which oil analysts say may threaten Organisation of Petroleum Exporting Countries (OPEC) production cap.
Though it is unclear if the cap on production will be extended beyond March next year, analysts are saying that with the Majnoon deal underway Iraq may want to lift the ban on production and allow market forces to determine price.
Iraq, the second-largest producer in OPEC, 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.
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It pumped about 4.6 million barrels a day in December, just before the curbs took effect, and development of the West Qurna-1, Halfaya and Zubair oil fields could take the nation toward capacity of 5 million barrels a day, according to consultant Wood Mackenzie.
Unconfirmed reports have it that Chevron was considering buying Shell’s stakes in Majnoon and the West Qurna-1 oil fields.
However al-Luaibi noted that Shell hasn’t quit Majnoon, and that the Iraqi oil ministry is still in talks with the producer.
“Until now, we are still in talks with Shell, and no decision has been made in relation to exiting the Majnoon field. We hope to reach a satisfactory deal for the two parties,” he said.
Though Chevron and Total are yet to react to al-Luaibi’s statement, Shell said in a 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.”
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 percent 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 percent stake in West Qurna-1.
Iraq committed to reduce crude output by 210,000 barrels a day 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 percent of gross domestic product last year from 12 percent in 2015, the International Monetary Fund said in August.