Royal Dutch Shell is nearing a preliminary deal with Iraq for a US$11 billion petrochemical complex in what would be the first major investment in the country’s downstream sector.
The Anglo-Dutch oil producer is close to a heads of agreement with the government in Baghdad, outlining the major issues of a deal that could create thousands of jobs.
Hans Nijkamp, Shell’s country chairman for Iraq, said there would be 162 jobs outside the plant for every one inside it.
“With the signing of the heads of agreement, we’ve really kicked off the next phase,” he said yesterday at a conference in Abu Dhabi. “On the back of an ethane cracker you can have a whole petrochemical industry and you have a huge opportunity to create employment there.”
The heads of agreement follows a memorandum of understanding signed in April last year for a feasibility study for a factory to make the plastic building block ethylene. The project is called Nebras, or “beacon of light”. Over the next decade, Iraq is seeking $35 billion to $50bn in investment in its nascent petrochemicals industry, and hopes to produce 10 million tonnes of product a year.
The oil major's willingness to invest further in Iraq, where it already pumps about 200,000 barrels per day of crude from the Majnoon field and is overseeing a $17.2bn project to corral gas from southern Iraq's oilfields, is welcome news after the oil sector in the country was hit by disruptions caused by unrest.
Schlumberger and Baker Hughes, two of the world’s biggest oilfield service providers, have halted operations in Iraq after religious protests this month at the Rumaila field, and a major oil conference scheduled to take place for the first time in Basra was called off this week.
Although Shell has been able to maintain operations at Majnoon, it has moved some of its staff out of the country to “create space” in the camps, said Mr Nijkamp. The company has placed its focus on preventative measures, such as early communication with surrounding communities and hiring and training a local workforce.
“We haven’t had any social unrest at the Majnoon field, basically because of this early two-way communication,” he said. “The development of the private sector will accelerate the socio-economic development of Iraq and thereby stabilise the country more quickly.”
Iraq, Opec's second biggest producer, is projected to boost production to 3.5 million barrels per day (bpd) by next month from 3.3 million currently. That is part of an overall target to raise production to 9 million bpd by 2020, with 7.5 million dedicated to export.
Foreign investors point out that in addition to improving security, Iraq needs to revamp its port and customs systems to make it easier to bring in the complex equipment and specialised materials needed for projects ranging from de-mining former battlefields to erecting power plants.
Shell is also concerned about being able to secure enough rigs to drill the 1,000 wells it has planned for the Majnoon field.
“To have the rigs in country to do that, that’s not going to be simple, and that’s only one of the fields,” he said. “Unless we work together with the Iraqi government and fix these port systems and customs, you will not see the ramp-up the Iraqi government is targeting with production.”
ayee@thenational.ae
