Exclusive: Petronas confirms exit from Iraq's Majnoon oilfield

Malaysia's Petronas has confirmed its exit from Iraq's Majnoon concession along with joint stakeholder Shell, after the Iraqi oil ministry announced it would assume control of the field.

"Petronas confirms its exit from the Majnoon oilfield, Iraq, together with Shell. We will be working with Shell on the handover of the field to the Basra Oil Company," a spokeswoman for Petronas said .

"An announcement will be made once details of the handover is finalised,"

The Malaysian state firm will relinquish its minority stake of 30 per cent along with Shell, which held a 45 per cent interest by June 2018.

The Iraqi oil ministry awarded the concession in Majnoon, one of the world's largest oil fields with estimated reserves of 38 billion barrels, to the Anglo-Dutch oil major in 2010 under a technical services contract. Shell was tasked with raising production from the field, littered then with mines and weapons from the Iran-Iraq war in the 1980s to 1.8 million barrels per day (bpd) by 2017, a target the oil company found daunting. Following the fall in oil prices, Shell saw a steep decline in profitability per barrel of oil and subsequently announced its decision to quit in September.

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Shell places gas above oil as it exits Iraq fields

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On Thursday, the oil ministry announced it had put together a new management team to oversee the transition of interest back to the state. It also outlined a target to ramp up production to 400,000 bpd from the current level of 235,000 bpd "over the coming years", without specifying a timeline.

"The priority of the new management team is to cut the cost of producing a barrel [of crude] from Majnoon by 30 per cent," Iraqi oil minister Jabbar Al Luaibi said in a statement on the ministry's website last week.

Iraq, the second the largest producer of oil within Opec after Saudi Arabia, is balancing the need to raise output to finance its post-ISIL reconstruction efforts while maintaining production cut quotas as part of an agreement with other fellow oil exporting states to stabilise prices.

Baghdad, which had earlier targeted raising its production to five million bpd by the end of 2017, requires significant funding and expertise from international oil companies (IOCs) to develop its massive fields. However, IOCs like Shell found the terms of their contract with the government too restrictive.

"Iraq's technical service contracts constrain upstream investment in two ways. Firstly, Iraq effectively pays the capex through cost recovery so any major investment has to be budgeted and approved by the government," said Ian Thom, principal analyst, Middle East upstream at energy consultancy Wood Mackenzie in Edinburgh.

"Secondly, the low profit fee for the international investor means Iraqi projects often struggle to compete for capital against more profitable projects. Iraq's budget primarily comes from oil revenues, so when oil receipts are low, only a small share of that can be reinvested back into oil and gas."

There are hopes that IOCs may return to Majnoon, following Mr Al Luaibi’s comments on the sidelines of Opec’s gathering in Vienna in November, where he suggested a consortium of the US’s Chevron, France’s Total and PetroChina may be invited to operate on terms different to that agreed with Shell.

Following its exit, the Malaysian firm's key interest in Iraq is through its majority stake in the Garraf oil field (45 per cent) in the southern Dhi Qar province, from where production currently stands at 100,000 bpd. Its other interests include minority stakes in the Halfaya and Badra concessions, also in the south.

In numbers: PKK’s money network in Europe

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Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm

Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year

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Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners

TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Sustainable Development Goals

1. End poverty in all its forms everywhere

2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture

3. Ensure healthy lives and promote well-being for all at all ages

4. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all

5. Achieve gender equality and empower all women and girls

6. Ensure availability and sustainable management of water and sanitation for all

7. Ensure access to affordable, reliable, sustainable and modern energy for all

8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

9. Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation

10. Reduce inequality within and among countries

11. Make cities and human settlements inclusive, safe, resilient and sustainable

12. Ensure sustainable consumption and production patterns

13. Take urgent action to combat climate change and its effects

14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development

15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss

16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels

17. Strengthen the means of implementation and revitalise the global partnership for sustainable development