Financial Times: Shell puts Iraq project on hold

By Clay Harris and Joanna Chung

Published: May 5 2004  

Royal Dutch/Shell has investigated the possibility of participating in an Iraqi oil project but decided not to proceed, at least for now, according to executives familiar with industry developments in the region.

The Anglo-Dutch group is understood to have bought a tender for work in the Khurmala field near Kirkuk this year. This gave it access to technical data about the field, which is believed to contain reserves of at least 1.5bn barrels.

Iraq has huge potential attractions for Shell, which is desperate to boost its proved reserves after having to cut them by more than 20 per cent this year in a series of embarrassing disclosures.

The initiative in Iraq was undertaken at the behest of Wolfgang Strobl, Shell's director for exploration and production activities relating to Iraq. Having bought the data from the Iraqi oil ministry, however, Shell decided not to proceed at this time.

Declining to comment on the specific project, Shell said: "We would welcome the opportunity to help Iraq build its energy industry once the security situation allows and once an internationally recognised Iraqi government is established."

Market rumours of Shell's possible interest in Iraq on Tuesday helped to boost the shares of Petrel Resources, the Irish independent that is the only western oil company to have maintained an active presence in Iraq for the past few years. Its shares closed 1¼p higher at 36p.

Petrel has submitted three tenders for work in fields with proved reserves in Kirkuk and Hamrin in northern Iraq and the Subba and Luhais joint field development in the south.

The tenders - for developing or repairing oil production facilities - are cash contracts that Petrel hopes will be converted to risk-sharing agreements in the future.

According to Petrel, the three tenders amount to more than 4bn barrels of proved reserves. Coincidentally, this is about the shortfall to which Shell has had to own up this year.