Shell exits oil fields in Iraq to focus on gas production

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Royal Dutch Shell is set to end a century of oil production in Iraq by withdrawing from two of the Arab state’s flagship fields to focus on more profitable gas development.

Shell’s retreat highlights the challenges foreign operators face with low-margin oil contracts in Iraq, an OPEC member that sits on some of the world’s biggest oil reserves and wants to boost production after years of conflict hindered development.

The Anglo-Dutch firm said on Wednesday it had agreed with Iraq’s oil ministry to relinquish operations at Majnoon field to the government after unfavorable changes to fiscal terms. The announcement confirmed an earlier Reuters report.

Shell is also selling its 20 percent stake in West Qurna 1 oil field in the south of the country. The field is operated by Exxon Mobil. Investment bank Lazard is running the sale for Shell, industry sources told Reuters. The bank did not immediately respond to a request for comment.

Shell said it was still committed to producing gas in Iraq, saying it would focus on developing and expanding the Basra Gas Company, which processes gas from the Rumaila, West Qurna and Zubair fields. It has a 44 percent stake in the joint venture.

Shell produced almost 20 million barrels of oil from Iraq during 2016, which accounted for about 3.5 percent of the firm’s total oil output last year, according to Shell’s annual report.

“The Oil Minister of Iraq 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,” a Shell company spokesman said.

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