ERBIL, Kurdistan Region of Iraq - Oil giant Shell withdraws from talks on building Iraq’s largest petrochemicals project in Basra, the country’s ministry of industry announced on Tuesday.

In a statement from the Iraqi ministry of industry, the ministry announced that Shell had apologized to the Iraqi ministries of industry and oil for being unable to continue talks regarding the Nebras petrochemicals project in Basra.

“Shell confirmed its continuation to support the project through its partnership with Basra Gas Company,” the statement added.

The Nebras project in Basra was first initiated in 2015, the project’s cost was expected to be around $8.5 billion and would in turn make Iraq the largest producer of petrochemicals in the Middle East with a projected production of 1.8 million tonnes of petrochemicals annually.

The New Region on Wednesday reached out to Shell regarding their withdrawal, however they were not immediately available for comment. 

The Iraqi ministry of industry on Wednesday said that the company has withdrawn from the project due to a change in their investment policies, and a possible substitute for the company would be chosen in the coming days.

“Shell company withdrew from Nebras project because of a change in their investment policies as they no longer invest in the petrochemicals sectors, rather only in the sector of gas,” ministry spokesperson Dhuha al-Juboori told The New Region.

“There are several candidates who will be subjected to study by the Ministry. A suitable company will be chosen in the coming days, but so far there is no specific name,” she added.

Shell was among the first international companies to operate in Iraq since the discovery of oil in Kirkuk in 1927, according to their own website.

The Iraqi industry ministry added that Iraqi Prime Minister Mohammed Shia al-Sudani has directed their ministry and the oil ministry to look for possible investors in Shell’s stead to continue the project.

The country had previously called on Saudi giant Aramco to participate in the project.

Iraq, despite having the world’s third largest proven oil reserves, has for years struggled to establish a natural gas industry of its own.

The country is considered among the top countries contributing to global gas flaring, a method that not only wastes the country’s ability to produce its own gas and fuel its own electricity, but also negatively impacts the climate.

For years, Baghdad has been reliant on importing gas from neighboring Iran to fuel the country’s electricity generation, and during excessively hot summers, the country experiences blackouts as Iran at times reduces gas exports claiming they need it for local use.

Iraqi PM Sudani has explored several ways into turning the country into a self-sufficient one when it comes to gas supply, however in 2023 the country reached preliminary understanding with Turkmenistan to import Ashgabat’s gas through Iranian pipelines that are linked to Baghdad. 

Iraq signs an MoU with Turkmenistan to solve the electricity crisis, but is that the answer?

Read more about the challenges facing Iraq in this piece by @doraid_abdullah: #TheNewRegion #IraqElectricity

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Updated at 4:39 pm with statement from the Iraqi Ministry of Industry.