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Shell is latest oil major to monitor Iraq as US pulls some embassy staff

Dubai — Shell on Thursday said it is closely monitoring the situation in Iraq, adding to the list of major international oil companies that are watching the country amid increased geopolitical tension between Iran and the US.

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"Shell is closely monitoring the current developments in the region and as of now we maintain our standard operating procedures," Shell told Platts in an emailed statement.

US major ExxonMobil and London-based BP on Wednesday said they are monitoring the situation in Iraq, following an announcement from the US embassy in Baghdad that it would be removing non-emergency US personnel from the country due to an "increased threat stream." That view was shared with the Iraqi government during US Secretary of State Mike Pompeo's visit on May 7 who has since decided to place Iraq on "ordered departure," a Department of State official told Platts.

ExxonMobil, BP, Eni and Lukoil operate four of Iraq's largest oil fields: West Qurna 1 by ExxonMobil, Rumaila by BP, Zubair by Eni and West Qurna 2 by Lukoil. Shell has pulled out of oil activity in Iraq but is the most active IOC in the gas sector through its gas-capture program in Basrah -- the Basrah Gas Company, a joint venture between Shell and the Iraqi government.

The warning from the US embassy included Erbil in the Kurdish region of northern Iraq -- an area which has seen far fewer violent incidents than federal Iraq. The announcement came after the US tightened sanctions on Iran's energy industry and drone attacks on a key Saudi oil pipeline that Iran-linked Houthi militia took credit for.

"It is the US perception of risks to its interests in Iraq that has changed, not the inherent risk itself, and that has prompted the sudden change in tone in recent days," Niamh McBurney, head of MENA for global risk analysis firm Verisk Maplecroft, told Platts in an email Thursday. The decision to remove some workers "appears to be a political decision" that is "more about the US not wanting to engage with Iran in Iraqi territory as part of its 'maximum pressure' campaign."

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Foreign embassies have different assessments of the threat level in Iraq. A top British general stated on Wednesday that there was no increased risk. But authorities from Germany and the Netherlands said they were suspending training programs due to heightened risk.

"We do not see an increase in risk to IOC personnel or operations in Basra and Maysan, or elsewhere across the country, either from or as a result of the US warning," Maplecroft's McBurney said.

Another risk analyst, who spoke on condition of anonymity, told Platts: "We haven't heard of a single commercial company that is operating outside of 'business-as-usual'."

Two separate sources from oil companies active in Iraq said their assessment of the country remained unchanged and that their workers were not being pulled from the country.

"Companies are still active in Libya, where the risks are much, much worse," one of them told Platts.

"Our operations are totally fine, we are not aware of any increased threat level," another said.

Iraqi defense officials told Platts reporters in Iraq that IOCs are continuing their work in the country, and that the country is not under threat from Iran or Iran-linked militia. Saudi Arabia has pointed a finger of blame at the Islamic Republic for drone attacks on the Saudi Arabian onshore oil pipeline on Tuesday.

There have been signs in recent weeks that the US has been trying to beef up economic ties in Iraq.

Earlier this month, ExxonMobil was given the initial government nod for its involvement in the South Iraq Infrastructure Project, or SIIP, a complex, multifaceted project worth tens of billions of dollars after five years of delay. An ExxonMobil-led consortium would develop the Nahr Bin Umar and Ratawi oil fields in southern Iraq under the deal and increase output to 500,000 b/d from a combined 125,000 b/d.

One analyst active in Iraq said that there have been discussions at the higher levels about soft commodities deals between the US and Iraq. A source close to the government told Platts in early May that an unofficial condition of Iraq receiving waivers of US sanctions on its Iranian electricity imports was that the US could take a more active role in Iraq?s oil industry.

--Miriam Malek, miriam.malek@spglobal.com

--Edited by Claudia Carpenter, claudia.carpenter@spglobal.com