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Dow Jones Newswires: Shell VP Confirms Gas Development Talks with Iraq: ‘Shell Desperate For Iraq Success’

By  Adam Smallman and Oliver Klaus
FWN Financial News     

ABERDEEN, Scotland, Mar 29, 2007 (Dow Jones Commodities News via Comtex)
Energy giant Royal Dutch Shell PLC (RDSB.LN) confirmed Thursday that it has been in talks with oil officials from the Iraqi government over the development of the country’s gas industry.

Speaking on the fringes of an oil and gas conference in Aberdeen, Scotland,
Shell’s Executive Vice President for Development and Technology in Exploration and Production Matthias Bichsel confirmed representatives of his company met with Iraqi officials in Oman to explore opportunities for the development of Iraq’s largely untapped gas reserves.

Shell has offered to work with Iraq’s government to develop a plan for building its gas industry, Bichsel said, although he said the talks are at an early stage and no formal plan has been proposed yet. Bichsel couldn’t comment on whether the meeting in Oman had a positive outcome.

Managers from Shell spent much of last week with top oil officials from Iraq to discuss investment terms, people familiar with the matter told Dow Jones Newswires earlier this week.

The company hosted a week of meetings behind closed doors at a hotel in Muscat, Oman, to exchange information on prospective oil and gas joint-venture contracts and investments to upgrade Iraq’s dilapidated oil industry, a person with knowledge of the talks said.

Veteran Iraqi oil expert Issam al-Chalabi, a one-time oil minister for the country, said the talks in Muscat concentrated on the gas plan, with Shell officials apparently showing their Iraqi counterparts around the company’s gas projects in Oman.

The Muscat meeting follows another Shell-hosted gathering in the Netherlands recently at which Iraq oil ministry officials discussed the company’s blueprint for gas development, al-Chalabi added.

The Iraqi delegation in Muscat was led by Thamer al-Ghadhban, a former oil minister and now senior adviser to Prime Minister Nouri al-Maliki, Deputy Oil Minister Abdul Jabbar al-Wakkaa, the head of the Oil Reservoirs Co. Nateq al-Byaiti, and a senior official from the Ministry of Planning.

It isn’t known who represented Shell.

The efforts underpin attempts by foreign oil majors such as Shell to ensure Iraq offers them favorable investment conditions, just as lawmakers prepare to vote on a draft oil law that puts in place a nationwide framework to develop its hydrocarbons industry.

A Shell spokesman said the company has three conditions to invest in the Iraq: free elections, which have now taken place; the implementation of new oil and gas legislation; and improved security.

Shell has long expressed interest in opportunities in Iraq, where it had concessions from the 1920s until the nationalization of its oil industry in 1972.

It has already begun studies for the government with an eye to possible acreage when the oil law is passed.

Following cabinet approval last month, lawmakers in Iraq are soon to debate the oil law that is expected to open the country’s 115 billion barrels of proven oil reserves, the world’s third largest, to foreign investors.

But the legislation’s current form fails to clarify issues critical for investment in the country, namely the terms for foreign oil companies’ participation, and whether they would be allowed to take majority stakes in some Iraqi oil fields.

International oil companies have long been accused of attempting to influence the terms of oil investments in Iraq.

In the fall of 2004, the International Tax and Investment Centre, which lobbies for business-friendly legislation and is financed by companies such as BP PLC (BP) and Shell, delivered a report advocating production-sharing agreements in Iraq.

The Centre’s Iraq project, which comprises BP, Shell, Eni SpA (E), Exxon Mobil Corp. (XOM), Total SA (TOT) and Chevron Corp. (CVX), is due to meet again this spring.

Shell Desperate For Iraq Success

Shell is desperate to gain a foothold in Iraq because “its current oil stakes aren’t in a good situation” according to Shamkhi Faraj, a former Iraqi oil official and now an oil consultant.

Iraq, he added, “wants to diversify its investment relations with oil majors to include not only American companies but also European, like Shell, and others.”

Al-Chalabi added that Shell boasts particularly strong relations with Baghdad, even during the former regime of Saddam Hussein.

Iraqi oil officials have previously said Shell was holding talks for a service contract to carry out oil-field development in Iraq as well as to develop Iraq’s vast gas fields.

Since 2005, the Anglo-Dutch major has also been working on technical studies on the Maysan oil field in the south and the large Kirkuk field in the north.

Shell, like Norway’s Statoil (STO), has an agreement to bring Iraqis to their overseas operations for training, a key part in developing relationships.

The pace of interest in Iraq from oil companies has quickened in recent months as the oil law moves nearer to completion.

ExxonMobil is joining the lengthening queue lining up to enter Iraq, though that day may be some way off.

“There are areas like Iraq that at some point in time we may be able to go,” Stephen Cassiani, head of ExxonMobil’s upstream research, told Dow Jones Newswires in Bahrain recently.

“We can’t go now for obvious reasons…but that doesn’t mean we’re not watching it. It doesn’t mean we don’t understand it,” he added.

Copyright (c) 2007 Dow Jones & Company, Inc.

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