Shell Withdraws from Its Last Iraqi Oil Fields
Shell Withdraws from Its Last Iraqi Oil Fields
The second-largest oil company in the world is reducing its operations in the Middle East, according to Dow Jones.
Shell announced that it would sell its stake in Iraq’s West Qurna-1 oil field to the Japanese firm Itochu Corp. for an undisclosed sum. This move marks another step in Shell’s gradual withdrawal from the region. Later this year, the company is also expected to exit the Majnoon oil field while retaining its gas projects in the country.
Shell’s Exit from Iraqi Oil Assets
The sale of Iraqi oil assets is one of Shell’s final steps in divesting from large Middle Eastern oil fields.
- In 2003, Shell produced 450,000 barrels of oil per day in the Middle East.
- Over the past 15 years, its businesses in six countries in the region have extracted thousands of barrels daily.
- After officially exiting Iraq, Shell will still have oil assets in Oman, where it produces around 220,000 barrels per day.
At the same time, Shell will retain significant gas assets in the Middle East, including projects in Qatar, Oman, Egypt, and Iraq.
"We are not leaving the region—not at all," said Shell CEO Ben van Beurden, regarding the Middle East. However, he noted that projects like Majnoon are becoming less strategically important for the company.
Declining Appeal of Middle Eastern Oil Reserves
Historically valuable oil reserves in the Middle East are losing their attractiveness.
- Oil companies face political and financial risks despite the region’s abundant oil supply.
- After the Arab Spring, security threats have increased, and contracts offered by Middle Eastern governments are often unprofitable.
Iraq has some of the toughest contract conditions in the industry:
- Foreign companies receive a fixed fee per extracted barrel, which many industry experts consider too low.
- "Conditions are too difficult for Shell," said Robert Mills, a former Shell executive and current CEO of Qamar Energy in Dubai.
- He explained that, for Shell, "the game is not worth the candle" in Iraq.
Shell confirmed its exit from West Qurna-1 but declined to provide further details about its Middle Eastern strategy. The company stated that it is still awaiting approval from the Iraqi government for the sale.
Shell’s Broader Retreat from the Middle East
In recent years, Shell has significantly reduced its Middle Eastern presence, partly due to Western sanctions and a shift in investment priorities.
- UAE: Shell withdrew its bid to renew a major oil concession in the United Arab Emirates (UAE). Meanwhile, BP and Total paid $2 billion to retain their rights.
- Syria & Iran:
- After 2010, Shell ceased operations in Syria and Iran due to sanctions linked to Syria’s civil war and Iran’s nuclear program.
- Unlike Total, Shell has not signed any investment deals in Iran, as sanctions risks remain high.
- According to sources, Shell struggled to secure major international banks to facilitate investments in Iran.
While Shell has shown interest in returning to Iran, the political and financial risks remain significant, making its Middle Eastern oil operations increasingly unsustainable.