Despite cutting its capital spending over $15 billion, Royal Dutch Shell and Iraqi government signed an $11 billion deal to build a petrochemicals plant in Iraq.
“Shell can confirm that on 28 January 2015, a Heads of Agreement for a potential petrochemicals project in southern Iraq was signed by representatives of Shell and the Iraqi government,” a Shell spokesperson told The Anadolu Agency via e-mail.
The $11 billion petrochemicals plant will be located in Basra, southern Iraq, near the Persian Gulf, to be completed around 2020-21 to produce 1.8 million tonnes of petrochemical products every year, Iraq's Industry Minister Nasser al-Esawi said on Wednesday.
The plant, which will also help Iraqi government increase the country's raffination capacity, will be one of the largest refinery and the biggest downstream investment in the region as the oil giant announces cancellation of capital intensive major projects elsewhere.
The company announced Thursday that it will cut back capital spending over $15 billion dollars between 2015-17, amid 60 percent oil price decline since last June.
Shell said on Jan. 14 that the proposed Al Karaana petrochemicals project in Qatar with the country's state-owned oil company Qatar Petroleum was cancelled, stating 'High capital costs, particularly in the current economic climate prevailing in the energy industry,' in a press release on its website.
- Iraq strives to diversify its revenue sources
The decision to build the plant comes at a time as the country needs to create diversification for its revenues, which mostly depends on oil sales, by increasing its raffination capacity for domestic consumption and fuel exports.
Iraq's budget fell by 50 percent to $100 billion in 2014, while 95 percent of the country's budget come from oil exports, President of Economy and Finance Commission, and Kurdish Member of Parliament, Dr. Izzet Sabir told The Anadolu Agency on Jan. 13.
Iraq's Oil Minister Adil Abdul-Mahdi said on Jan. 19 that the Gulf country is producing oil at a record level of 4 million barrels a day.
By Ovunc Kutlu
Anadolu Agency
ovunc.kutlu@aa.com.tr