Shell is in talks with the Iraqi Government about restoring and expanding a chemical plant near the city of Basra in a $2.1 billion (£1.1 billion) project, it emerged today.

Fawzi Hariri, Iraq’s Industry Minister, revealed that the terms of an agreement with Shell and the US giant Dow Chemical could be concluded by the end of the year.

He told Reuters: “We are looking to upgrade this [plant], and evaluate what type of products and facilities we need for the local market and beyond.”

The move is the latest sign that the world’s biggest energy companies are poised to begin the long-expected rush into Iraq after months of speculation.

BACKGROUND

• Oil surges on surprise US rate cut

• US pension funds ask Shell to ditch Iran

• Shell strikes new deal with Rosneft in Russia

• Shell drilling plan heralds Arctic scramble

• Shell chief calls for EU energy supremo

Oil sector’s big issue is not discovery

The extent of the US credit crunch suggests a slowing American economy, which, in turn, implies less demand for oil

Related Internet Links

• Royal Dutch Shell company information

• Royal Dutch Shell share price chart

Related Links

• Shell evacuates Gulf of Mexico staff

• Shell rakes in profits from Canadian oil sands unit

• Soaring oil price pushes Shell to record

Earlier this month, Total and Chevron signed an agreement to work together on projects in Iraq, including plans to improve production at the giant Majnoon oil field, the fourth-biggest in Iraq.

Shell has persistently denied any suggestion that it is engaged in talks regarding any official project, instead reiterating that it only hopes to help once the political and security situation improves.

But industry experts have long claimed that the Anglo-Dutch group is drawing up development plans for Rumaila, Iraq’s biggest oilfield. A spokesman was not immediately available for comment today.

A spokesman today said: "Shell has a very long history of working in Iraq. We would welcome the opportunity to help Iraq rebuild its energy industry, but we will only enter the country once security, living, and working conditions are improved.

"We are looking at opportunities from outside the country but have no comment to make on this particular project."

Iraq holds an estimated 110 billion barrels of oil, with more than half still to be developed, offering huge opportunities to Western companies desperate for new reserves.

Muhammad-Ali Zainy, a former oil official in the Iraqi Government, told The Times earlier this month: "Iraq is the last remaining frontier that offers so much potential."

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive