Leading integrated energy firm Royal Dutch Shell plc (RDS.A) is closing in on a deal with the Iraqi government to set up a major petrochemical facility in the southern part of the country.
The $11 billion ethane-cracking facility – entitled Nebras – would produce ethylene, which is used in making plastic.
Both the parties are expected to sign a Heads of Agreement within a few weeks. Per Shell management, the company had signed a memorandum of understanding (MoU) last Apr for a technical and economical feasibility study to realize the full potential of the petrochemical project.
Shell already has a strong foothold in Iraq and is helping the government to exploit its resources. It is developing the giant Majnoon oil field, near Basra that came online last month and is currently producing around 200,000 barrels per day. Also, last year, the company had inked a $17.2 billion deal to collect gas from Iraq’s southern oil field, helping the country to utilize the produce for its domestic energy requirements.
Shell’s worldwide operations involve various activities related to oil and natural gas, chemicals, power generation, renewable energy resources, and other energy related businesses.
In terms of assets, Royal Dutch Shell owns a strong and diversified portfolio of global energy businesses that offer attractive growth opportunities.
However, Royal Dutch Shell’s relatively heavy downstream exposure leaves it less diversified than its integrated peers. As such, the group’s results remain greatly exposed to refining/marketing margins.
Royal Dutch Shell currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.
However, there are other stocks in the energy sector that are expected to outperform in the near term. These include the Zacks Rank #1 (Strong Buy) stocks of SM Energy Company (SM), Clayton Williams Energy, Inc. (CWEI) and Emerge Energy Services LP Commo (EMES).