Shell’s Iraqi Gas Project: How Iran will benefit

The Iranian company that is set to benefit the most from a Shell-backed project in Iraq will be the largest beneficiary. This shows the omnipresence of Tehran’s interests in Iraq and puts the UK group in conflict with the changing geopolitical priorities of the West in the Middle East.

Basrah Gas Company will be a major power consumer from the Rumaila Independent Plant in southern Iraq once the new facility of the gas company starts operating in June.

According to three people who were involved in the contracts and documents, the Rumaila plant belongs to Shamara Holding, a Jordanian company, but it was built by Mapna Group of Tehran, which has a right to 78 percent of the revenues from electricity sales.

Shell’s joint-venture, which received funding from the World Bank, has been widely praised by its role in capturing gas previously flared on Iraq’s oilfields, and processing it to be used for local power generation, for cooking, or for export. Iraq’s South Gas Company, a state-owned company, owns 51 percent of the project. Mitsubishi Trading Company in Japan owns 5 percent.

Shell and Basrah Gas said that they had not dealt with Mapna. Basrah Gas’ payments for electricity from the Rumaila Plant, made through Iraq’s Ministry of Electricity, do not violate US or European sanctions against dealing with Iran.

Mapna’s involvement in the power station reflects how deeply ingrained the Iranian regime has become in the Iraqi economy.Renad Mansour of Chatham House, the director of the Iraq Initiative, said that Iran’s influence and interests are deeply rooted in the Iraqi state and ministries. “Iran’s long-term investment and network ensures it remains the most powerful foreign power.”

Iran’s influence is particularly pronounced in the energy sector. Twenty years after US-led invasions, Iraq has become heavily dependent on Iranian gas and electricity imports, which supply more than one third of its electricity needs.

Shell is not the only company that has to deal with this issue. BP, ExxonMobil and other international oil companies run oilfields that draw power from Iraq’s grid.

Mapna’s Rumaila Plant is probably the best example to show Iran’s penetration in the sector. This also shows how the west has been inconsistent in its engagement rules with Tehran for the last decade, which has complicated operations for foreign investors.

Mapna, which was chosen to build Rumaila in 2015, was just about to sign an agreement with the west on nuclear power. Relations were also improving. Three years later, Donald Trump, the US president, pulled out of this deal and reimposed sanctions.

Shamara was awarded the contract in 2014 to build a 3,000 megawatt Rumaila facility. The agreement to purchase power from Iraq’s Ministry of Electricity backed up this award. According to a source familiar with early stages of project, the company had initially hoped to partner with a US-based or European firm, but was unable to attract interest when Isis fighters took over parts of Iraq and Syria in the summer of 2014.

The person also said that two years of nuclear negotiations between the west and Iran had created the opportunity for renewed engagements with Iranian companies.

Mapna won a contract worth $2.05bn to build and deliver key technology for Rumaila, which was backed by a payment guarantee from the Iraqi government signed on 9 July 2015 – just days before the nuclear deal between the West and Iran.

The plant received support from the Export Guarantee Fund of Iran in the form of a $300mn political risk insurance policy. The plant received support from the Export Guarantee Fund of Iran in the form of a $300mn political risk insurance policy and is described on

Unearthed – a Greenpeace-backed investigative journalism group – shared documents with the FT that revealed the Shell joint venture had agreed to purchase power from Rumaila in 2019. The contract was for $35mn to build a 18km powerline to a nearby natural gas liquids facility.

The Basrah NGL Plant is expected to begin operations in June. It will draw up to 70MW from Rumaila. This could rise to 200MW if the NGL plant were to be expanded.

Since 2020, the Rumaila plant produces up to 1,500MW. The Ministry of Electricity is the only power provider in Iraq. It acts as a middleman, selling power to Basrah Gas and paying Shamara for power produced.

According to documents and three individuals involved in the contract, Shamara receives 22 percent of the revenue, while the remainder flows to Mapna to repay its work on the Project. Shamara declined comment.

Shell said that it has “no business dealings” with Mapna, or with any Iranian entity. It also stated that it was unable to comment on the Ministry of Electricity’s “infrastructures, flows of funds or commercial arrangements they have with third party suppliers or off-takers”.

It also defended the Basrah Gas Joint Venture, saying it was “founded to increase Iraq’s self-sufficiency in energy and reduce its dependence on imported gas”.

Requests for comments from Mapna, South Gas Company, and the Iraqi Ministry of Electricity were not answered. Mitsubishi directed questions to Basrah Gas.

Basrah Gas stated that it paid only the Ministry of Electricity for electricity and did not have any contracts with Mapna or Shamara, other than the agreement to build the powerline in 2019. BGC said that its integrity due diligence of Shamara Holding revealed no concerns related to trade compliance or sanctions.

Mapna is a controversial part of the project. According to a former adviser to the prime minister and a person with knowledge of the situation, Iraq has frozen the Iraqi bank account where Mapna receives its funds under US pressure since 2021. Mapna, as a result of this, has been unable to finish the plant that was supposed to produce 3,000MW when completed.

People said that the US was concerned about Hassan Danaeifar’s role in lobbying Baghdad for Mapna. Danaeifar is a former Iranian Ambassador to Baghdad, and a former member of Iran’s Revolutionary Guards. Danaeifar was not available for comment.

In response to questions regarding Mapna, the US State Department stated that the US and Iraq were working together to modernise Iraq’s financial system, fight corruption and prevent financial manipulation. The US State Department said that it was focusing on “enhancing Iraq’s energy security”, by supporting the country in advancing gas capture projects for reducing emissions and generating power, as well as constructing regional interconnections and upgrading electricity infrastructure.

Not only the transfers to Mapna have been problematic, but other energy-related payments made between Iraq and Iran also had problems. US sanctions waivers permit Iraq to import power and gas directly from Iran, but Baghdad payments are only able to be used to pay for food or medicines or other international transfers authorised by Tehran. This bizarre arrangement allows Iraq to meet its domestic energy demand, but it also means that payments to Iran can be delayed. Tehran has been known to cut off power supply when this happens.

Yesar Almaleki, Gulf analyst for Middle East Economic Survey said that the sanctions had created a Catch-22 situation for Iraq. Washington understands the importance of [Iranian power and gas imports] for the political and social stability of Iraq and continues to grant import waivers. The restrictions on the transfer of payments to Iran means that they are building in Iraq.