Iraq's oil ministry, struggling with sputtering output, has blamed Anglo-Dutch energy giant Royal Dutch Shell PLC (RDSA.LN) over $4.6 billion in lost revenue due to production delays, in a letter seen by AFP Monday.
Iraq
's oil
ministry, struggling with sputtering output, has blamed Anglo-Dutch energy
giant Royal Dutch Shell PLC (RDSA.LN) over $4.6 billion in lost revenue due to
production delays, in a letter seen by AFP Monday.
The document, dated
July
21, 2013
, sharply criticizes the foreign energy company for shortfalls in oil
extraction at the giant Majnoon field in south
Iraq
, and
comes as oil exports have fallen to their lowest level in 16 months even as
Baghdad
has
looked to cement its role as a key global energy producer.
It indicates growing frustration within the government over oil exports, which
account for the lion's share of state revenues--a dispute with the northern
Kurdish region has suspended expected sales from there, and sales via a
pipeline through to Turkey have markedly dipped compared to previous years.
Two separate sources with knowledge of the letter's contents confirmed its
authenticity to AFP, but declined to be identified discussing the matter.
The letter was addressed to Shell's Iraq Vice President Hans Nijkamp and bore
the letterhead of the oil ministry's Petroleum Contracts and Licensing
Directorate.
According to parts of the letter seen by AFP, it stated that "production
from Majnoon Oilfield ... has been stopped for an unacceptably long time"
and added that "aggregated losses of production" at Majnoon amounted
to 44 million barrels of oil.
"As a result,
Iraq
has
suffered heavy direct losses, which we have determined conservatively at more
than (4.6) billion U.S. dollars," the letter, which was written in
English, read.
"Of course,
Iraq
continues to suffer losses each day as a result of Shell's failure to perform
its contractual obligations."
It said that "the field has been shut down and the production stopped
since
1st July 2012
based
upon Shell's request to perform the rehabilitation of the existing surface
facilities."
"This rehabilitation was to have been completed in four to six months with
production resuming no later than
1st
January 2013
."
It continued: "So far, Shell has neither resumed the previous production ...
nor achieved the First Commercial Production."
The ministry also alleged that the company has "not taken any serious
measures to handle the associated gas produced from the field."
"The flaring of this gas has had a negative impact on
Iraq
both
economically (revenue losses) and on the environment as well as it's in
violation with the Iraqi laws."
A consortium of Shell and
Malaysia
's
Petronas signed a contract with
Baghdad
in
January 2010 to develop Majnoon, a giant oil field in southern
Iraq
.
Shell holds a 45-percent stake in the project, while Petronas has 30 percent,
with the remainder held by a state-owned Iraqi firm.
Shell spokesman Diego Perez and Iraqi Oil Ministry spokesman Assem Jihad
declined to comment on the letter.
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