Global Policy Forum

Shell Becomes First International Oil Firm


By Leila Fadel

September 23, 2008

Royal Dutch Shell PLC opened an office Monday in Iraq, the first major oil and gas firm to set up a new operation here since the industry was nationalized in the 1970s. Iraq has some of the largest proven crude-oil reserves in the world, and other firms are expected to follow suit.

The announcement followed the signing of an accord between Shell and the state-run Southern Oil Co. establishing a partnership to recover and market billions of dollars' worth of natural gas that's now being flared off. Earlier this month, the Iraqi parliament approved the plan giving Southern Oil a 51 percent stake and Shell 49 percent in the project.

"Today I inaugurated the Baghdad office," said Linda Cook, an executive director with Royal Dutch Shell PLC. "It's a milestone for Shell." Shell officials wouldn't disclose where the office is, but said the company would continue to expand its presence in Iraq. This is the second deal that the elected Iraqi government has concluded with a foreign firm, after a $3 billion deal with the China National Petroleum Corp. to develop an oil field in Wasit province, about 100 miles southeast of Baghdad. That deal, which dated from the era of deposed dictator Saddam Hussein, was revived after being canceled upon the U.S.-led invasion in 2003.

A staggering 700 million standard cubic feet of natural gas currently is wasted daily in southern Iraq. The new deal would set up infrastructure to produce liquefied petroleum gas, natural gas liquids and a natural gas supply for domestic use and export. Western oil firms were kicked out of Iraq when the oil industry was nationalized in 1972.

"Iraq should not be isolated from the world, and we should have contracts with any international company we want . . . because (restoring ties with) Iraq is the aim of all the international oil companies," said Dr. Abdul Jabbar al Hilfi, the head of the energy studies department at the Center for Arab Gulf Studies, in Baghdad.

Western oil companies are eager to return to Iraq, but the parliament has yet to pass a law that would give them a large stake in oil production in Iraq. Many Iraqis worry that foreign oil companies would exploit the country's oil fields with no benefit to Iraqis.

Also on Monday, a U.S. soldier was gunned down in Baghdad. No other details were available. In Diyala province, north of Baghdad, police uncovered a mass grave filled with dozens of bodies in an area that the militia of radical Shiite Muslim cleric Muqtada al Sadr once controlled, they said. Police said the grave was uncovered after a detainee admitted to killing 71 of the victims.

McClatchy special correspondent Laith Hammoudi contributed to this report.

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