Shell Quits Iraqi Petrochemicals Plant Talks

Shell said today it will withdraw from talks to build a petrochemicals plant in Iraq's southern oil hub of Basra after nearly 10 years of trying to get the project off the ground, dealing a blow to Baghdad's aim of driving foreign investment in its energy sector.

"After in-depth evaluation on the feasibility of the Nebras integrated petrochemicals complex with our government partners, Shell has decided not to proceed with the project," Shell said. "This decision is in line with Shell's focus on performance, discipline and simplification, and on the high-grading of our chemicals portfolio."

Iraq's ministry of industry and minerals confirmed Shell's decision, and affirmed the UK-based company's continued support for the project through its involvement in Basra Gas Company (BCG).

The Nebras project has been in the works for nearly a decade. After carrying out feasibility studies in 2012, Shell signed an initial agreement in 2015 to build a petrochemicals complex in Basrah that would take advantage of associated gas gathered by BGC. Since then the project has stalled. Iraq's oil ministry said in July 2019 it was close to signing an agreement with Shell to proceed, but the company has only said it continues to evaluate the scheme.

Shell had a 49pc stake in the venture. The project's cost was eventually estimated at $8bn, much less than the initial $11bn.

Ethane feedstock for Nebras will come from BGC which gathers, treats and processes associated gas produced at the Rumaila, West Qurna 1 and Zubair oil fields. BGC is a joint venture between Shell, state-owned South Gas and Japan's Mitsubishi.

Nebras was meant to mark a new phase for Iraq's under-developed petrochemicals industry, providing thousands of jobs and a new revenue stream for the country. Shell's exit deals a blow for Iraq's aspirations to attract foreign investment into its energy sector in general. Historically, Iraq had been a pioneer in the regional industry, setting up Petrochemicals Complex-1 at Khor al-Zubair on the Mideast Gulf in 1976. Another complex was built at Musayeb, just south of Baghdad. The 300,000 b/d Baiji refining complex includes a number of petrochemicals units, including a 50,000 t/yr linear alkyl benzene unit.

But sanctions during the era of former president Saddam Hussein, followed by years of war and a lack of investment have meant Iraq has been unable to build on those projects. The few petrochemicals facilities it does have are either not operating due to damage from war, or operate well below capacity after years of neglect.

February 15, 2024