KUALA LUMPUR: PETROLIAM Nasional Bhd (Petronas) will be pulling the plug on its participation in giant Majnoon’s oilfield in Iraq, following Royal Dutch Shell’s exit announcement from the venture last month.
A source close to the national oil company, which owns a 30 per cent stake in Majnoon, said it did not make money from the oilfield.
“Petronas has four blocks in Iraq. For the block it is partnering with Shell, it has decided to pull out as the company is not making money from it.
“It is evaluating the returns and risk profile for the whole Iraq venture but so far a decision has only been made on the Majnoon oilfield,” said the source.
The agreement to develop the Majnoon oilfield was inked in January 2010. Shell was awarded a 45 per cent stake, while Petronas holds 30 per cent and Iraqi state partner Missan Oil Co owns the remaining 25 per cent.
It is unclear whether Petronas has proceeded with the exit procedures with the Iraqi government.
On the timeline of the exit, the source said it would be done concurrently with Shell.
“It is expected that Petronas will jointly exit the oilfield with Shell. However, for Petronas’ three other oilfields, there is no firm decision as yet,” said the source.
“It will be evaluating the other three oildfields (Badra, Halfaya and Garraf),” he added.
Combined, all the four oilfields produce 640,000 barrels per day.
It was previously speculated that Petronas would take over Shell’s stake in Majnoon if the main shareholder backed out from the agreement.
Majnoon’s current production capacity was said to be 190,000 barrels a day on a gross budget allocation of US$1.3 billion (RM5.5 billion).
Last month, Shell announced its decision to sell its stake in the venture with the Iraqi oil ministry having started preparations to finalise its exit, according to an oil ministry letter and oil officials.
A letter signed by Oil Minister Jabar al-Luaibi dated August 23 and directed to Shell Iraq Petroleum Development (SIPD) gave approval for Shell to quit Majnoon, an oilfield near Basra which started production in 2014.
“We respect your desire and decision to seek an acceptable end of Shell Iraq Petroleum Development SIPD’s interest in Majnoon,” according to the oil ministry letter.
SIPD is Shell’s local unit.
Shell’s 45 per cent interest in Majnoon is under a technical service contract that expires in 2030.