Royal Dutch Shell in talks with Dow to develop petrochemical plant in Iraq?

30-Aug-07

Anglo-Dutch oil company Royal Dutch Shell is reportedly to be in talks with Dow Chemical to develop an Iraqi petrochemical plant for US$2.1 billion. The plant is to be based in the southern city of Basra, and would therefore rely on the city's 120,000 bpd refinery for its feedstock. This is a step towards gaining a strong foothold prior to projected opening up of the country's broken oil industry. But with the current scenario, will the project ever be profitable? Iraq is currently experiencing a refining shortage that would have a severe supply impact for any major petrochemical project. Although any real long-term profitability for the petrochemical project will depend on the reconstruction of Iraq's security and industrial infrastructure, the real advantage for Shell and Dow lies in getting a favorable position ahead of the passing of the country's notorious oil law. The law will be the foremost issue to address when the Iraqi parliament reconvenes in September, and companies are hoping that the plan to unlock over two-thirds of the country's reserves of 112 billion barrels will finally get approval.