Petronas to exit Iraq’s Majnoon oil field

Petroliam Nasional Bhd, the Malaysian state oil producer, plans to exit its stake in Iraq’s giant Majnoon oil field, people with knowledge of the matter said.

Petronas, as the company is known, has decided to withdraw from its 30% participating interest in the project because it considers the returns to be too low, according to one of the people.

The energy firm may soon hire advisors to help find an interested party to take up the holding, the person said, asking not to be identified because the information is private.

It communicated the decision to Iraq’s Oil Ministry in the past few weeks, another person said.

The Malaysian company follows Royal Dutch Shell plc in seeking to withdraw from Majnoon, which is one of the country’s largest oil fields with about 200,000 barrels a day of production.

Shell had a 45% interest in the Majnoon service contract, in which it was paid a fee for each barrel of oil produced above a certain level until 2030.

Petronas CEO Tan Sri Wan Zulkiflee Wan Ariffin, who took the helm in 2015, said last year he’s seeking to defer projects and cut expenses by as much as RM50 billion over the coming four years.

Petronas entered Iraq in 2009 when it won the rights to develop crude deposits at the Garraf oil field with Japan Petroleum Exploration Co Ltd.

The Malaysian company is also participating in the Badra oil field through a consortium led by Gazprom PJSC and has a stake in the Halfaya field being developed by companies including PetroChina Co Ltd.

Deliberations on with-drawing from Majnoon are at an early stage, and there’s no certainty they will lead to a transaction, the people said.

Spokesmen at Petronas and the Iraq Oil Ministry’s media office said they didn’t have any immediate comment.

Shell said last month it decided to surrender its stake in Majnoon after a performance penalty and remuneration factor, applied to the field by the government since May, had a “significant impact” on commercial viability.

The field, located near the southern Iraqi city of Basra, pumped its first oil in September 2013.

Chevron Corp and Total SA have expressed readiness to help develop the Majnoon field, Iraqi Oil Minister Jabbar Al-Luaibi said this week.

Iraq, the second-largest producer in the OPEC, reluctantly agreed in November to participate in production cuts to help end a global oil glut and has vowed to keep expanding capacity to be ready for the end of the deal next year. — Bloomberg