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Security fears stall Shell's Iraqi oil contracts

Royal Dutch Shell admitted making little progress in agreeing short-term oil service contracts in Iraq in recent weeks but said it was hoping for "entrepreneurial" natural gas deals.

  • Reuters
  • Published: 00:04 August 2, 2008
  • Gulf News

London: Royal Dutch Shell admitted making little progress in agreeing short-term oil service contracts in Iraq in recent weeks but said it was hoping for "entrepreneurial" natural gas deals.

Iraq had hoped to sign one to two year deals, under which Western oil majors are paid a fee to help boost oil output, early this year, but nothing has yet been agreed despite the passing of a June 30 deadline.

"We hope that we can sign something before not too long, but I admit that I have said that three weeks ago, and in the meantime we haven't signed anything," chief executive Jeroen van der Veer said.

Van der Veer said Shell was also working on potential gas deals with Iraq, which he hinted could offer a profit-sharing element. "We have entrepreneurial ideas of how we can co-operate with the Iraqis on the gas side," he said.

Security worries are holding up agreements but analysts say the structure of the short-term service deals is also a problem for oil majors. The companies normally only agree to profit-sharing deals so the fee-paying ones on the table currently are not in themselves very attractive.

Analysts say companies may agree to low-margin short-term deals to secure more lucrative long-term positions and van der Veer said his company envisaged the short-term deals would lead to longer term cooperation.

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