A group led by Royal Dutch Shell, Europe's largest oil company, signed a deal to develop Iraq's Majnoon supergiant oilfield, pledging to spend tens of billions of dollars on the project over the next two decades.
Shell, along with Malaysia's state-run Petronas, won the rights to Majnoon, a major prize near Iraq's southern oil hub of Basra, in an energy auction earlier this month.
Mounir Bouaziz, a vice president of Shell Gas and Power, and Abdul-Mahdy al-Ameedi, deputy director of the Iraqi Oil Ministry's licensing office, signed the initial agreement in downtown Baghdad on Sunday.
It must now be sent to the cabinet for approval. Bouaziz said the investment over the life of the 20-year deal would be "tens of billions" of dollars. "When the cabinet give agreement to the contract, and the final contract is officially signed, we will start immediately. We know the area, and we have been coming to Basra for more than a year and a half," he told reporters after the signing.
Shell is waiting for final approval of a natural gas deal also located in southern Iraq, which it will take on in partnership with Mitsubishi.
Then there is Exxon Mobil and Shell's initial deal for West Qurna Phase One, a field left over from an initial bidding round that concluded in June. That field has reserves of an estimated 8.7 billion barrels. Majnoon is even bigger. With a whopping 12.6 billion barrels, Majnoon is one of the world's largest untapped fields. Iraq is hoping a host of deals in the works will turn it into a major world energy player and increase output capacity to 12 millon barrels a day (bpd) in six or seven years, putting it close on the heels of global leader Saudi Arabia.
Output now stands around 2.5 million bpd as the industry struggles to overcome the legacy of continuous war, sanctions and underinvestment over decades. Oil officials have been in a triumphant mood since the December 11-12 auction, which awarded seven contracts to foreign firms.
For Majnoon, the Shell group proposed a per-barrel remuneration fee of $1.39 and pledged to increase output to 1.8 million bpd from a current production level of 45,900 bpd. Shell has a 60 percent stake in the consortium, while Petronas holds 40 percent.