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Shell seeks Iraqi oil prize with Chinese


April 15, 2009

Jeroen van der Veer, chief executive of Shell, is holding talks in Beijing about possible joint ventures in Iraq

Royal Dutch Shell is in talks with a number of Chinese companies about a possible joint effort to develop Iraqi oilfields. Jeroen van der Veer, chief executive of the Anglo-Dutch group, said yesterday: “We are in the process of forming partnerships for certain bids, and Chinese companies are a part of that.”

Mr van der Veer, who was on a visit to Beijing, refused to comment directly on reports that Shell is negotiating with China National Petroleum Corp (CNPC) and China Petrochemical Corp, the country’s two biggest government-controlled oil companies, about a project jointly to develop a vast oilfield close to the city of Kirkuk in northern Iraq.

He said that further details would be announced after bids to develop oilfields had been submitted to the Iraqi Government before a deadline of late June or early July.

He added that Shell would not settle on a timescale for developing the oilfields until it had undertaken a full appraisal of Iraq’s security situation and of the safety implications for its workers.

If signed, a tie-up with Shell would represent China’s second big effort to develop Iraq’s vast reserves of oil, which, at 115billion barrels, stand as the world’s third-largest pool after Saudi Arabia and Iran.

CNPC became the first foreign company to sign a significant oil deal with the Iraqi Government after the toppling of Saddam Hussein in 2003, when it signed a $3billion agreement to develop the al-Ahdab field.

Shell is eager to forge closer links with China, the world’s second-largest oil consumer after America, where consumption is continuing to grow despite the recession.

The company is jointly operating the Changbei gasfield in northwest China with CNPC and is bidding for another contract on a gasfield in the southwest of the country.

In Iraq, Shell is forging ahead with a joint venture with the country’s Southern Oil Company to capture gas that is being flared during oil production around the Basra area and use it for local power generation. The group has a number of staff in Iraq involved in this project.

Mr van der Veer said his trip to Beijing was aimed at establishing further areas where Shell might be able to work with Chinese partners. He said that progress was being made, but declined to offer further details.

Peter Voser, chief financial officer of Shell, who is due to take over from Mr van der Veer this summer, said that China was a key target market.

“I think China has a lot to offer in terms of future demand and so is very interesting as a country to invest in,” he said. “China is a key part of the long-term strategy of the Royal Dutch Shell group, and that’s not going to change.”

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