Shell said Wednesday it would exit Iraq's giant Majnoon field project after long-running talks on a planned output expansion from current levels of 220,000 b/d appeared to founder.
Under a timeline yet to be finalized, Shell said it has agreed an "amicable and mutually acceptable release" of its interest in Majnoon, which lies in southern Iraq near the Iranian border.
"Shell remains otherwise firmly committed to Iraq ," Shell said in an emailed statement. "By leaving Majnoon, Shell will be in a stronger position to focus its efforts on the development and growth of the Basrah Gas Company, and the Nebras Petrochemicals Project," Shell said referring its other Iraqi projects.
Shell would be the first major oil company operating an oil field under Iraq 's technical service contract model to exit a project. Statoil, a junior partner to Lukoil in West Qurna 2, exited in 2012 as part of a global withdrawal from hot zones after security incidents elsewhere.
Estimated by the Iraqi government to hold 38 billion barrels of oil, Majnoon came on stream in 2013 under a consortium of Shell, Malaysia 's Petronas and the state-owned Iraqi South Oil Company, or SOC.
Shell had been in talks with the ministry to reduce its plateau target at Majnoon, but it was never agreed to, and the ministry has been frustrated with Shell's pace of development at the field, according to sources.
Shell was intending to double Majnoon's output to 420,000 b/d, and preparations were under way for it to go ahead, with an extensive drilling program that begun in June.
However, that level of expansion remains far off earlier ambitions. Under the initial terms of the service contract with Shell and its partners in 2009, the international oil companies offered to raise production from the field to a plateau of 1.8 million b/d for a remuneration of $1.39/b.
Iraq in late 2014 provisionally agreed with Shell to reduce the plateau production target due to project delays and a lack of funding.
A year later, Shell said it had pushed back a decision to further develop Majnoon, citing upstream spending cuts in the face of low oil prices.
Shell's decision to exit the Majnoon project comes as the oil major prepares to bid for a contract to develop Iran 's giant Azadegan field, which lies across the border in Iran 's strategic West Karoun oil cluster.
Shell signed a memorandum of understanding with Iran 's NIOC in December 2016 to carry out a technical study of the Azadegan and Yadavaran fields as well as the Kish gas field.