Iraq has agreed to set up a joint venture with oil and gas giant Royal Dutch Shell to invest in developing the country’s natural gas supply.

The deal, which will see Shell supply the local market, is the second between the government and a foreign firm since the US-led invasion of Iraq in 2003.

It was signed by Iraqi Oil Minister Hussein al-Shahristani.

Iraq has enormous potential as an oil and gas supplier but has so far lacked the investment for it to be realised.

Under the terms of the deal, signed on Monday, Iraq will have 51% in the venture and Shell 49%.

The country will invest in natural gas in the oil-rich southern province of Basra.

International investment

The venture will initially focus on capturing some 700 million cubic feet of natural gas released per day as a by-product of crude oil extraction in the region.

But there are also plans to create a facility to produce liquefied natural gas – which is not a by-product of oil – for export.

With Europe keen to reduce its reliance on Russia for its energy supply, Iraq is seen as a viable alternative.

Iraq has proven natural gas reserves of about 112 trillion cubic feet, but analysts believe this is likely to represent only a fraction of what exists.

It opened its lucrative oil and gas fields to a select group of foreign companies in June to rehabilitate its ageing facilities.

The first foreign oil deal came when Iraq agreed a $3bn (£1.6bn) oil service contract with China.

News reported by The BBC

Oil prices have fallen further amid concerns that a slowdown in the global economy will dent demand.

US light, sweet crude fell $4.56 to settle at $91.15 a barrel in New York while Brent crude was down $5.02 to settle at $89.22 in London.

Oil prices fell $5 a barrel on Monday as global stock markets sank and news emerged that US refineries had not been damaged as expected by Hurricane Ike.

The oil price has fallen from highs of above $147 a barrel in July.

“If the economic turmoil continues, demand will continue to drop,” said Jonathan Kornafel, of options trader Hudson Capital Energy.

“It’s a bit of panic in the markets,” he added.

Market worries

Oil prices continued to fall despite reports of an attack on a Royal Dutch Shell pipeline in Nigeria.

A key market concern on Tuesday was the future of insurance giant AIG, which some feared could be the next financial giant to fold.

“AIG has more to do with the oil price right now than the Saudis do,” said Larry Grace, an analyst with Kim Eng Securities.

If more firms go bust, there are fears that gaining credit will be even harder, hitting both large firms and individuals.

If this happens then consumers are likely to seek ways to tighten their belts more, such as reducing their petrol consumption.

News reported by The BBC

World oil prices have edged slightly higher amid concerns that oil operations in the Gulf of Mexico may be disrupted by Tropical Storm Fay.

Analysts said the weather was being monitored. Royal Dutch Shell removed about 360 workers from the region over the weekend as a precaution.

US light, sweet crude fell 42 cents to $113.35 a barrel while London Brent crude lost 46 cents cents to $112.09.

The dollar weakening slightly also supported oil prices, observers said.

In addition, supply worries lifted the oil price – which had fallen to as low as $111 on Friday.

BP said that exports of Azeri oil by rail to Georgia had stopped because of “damage” to a railway line caused during the military conflict between Russia and Georgia.

The line, which runs from the Georgian capital of Tbilisi through the city of Gori before heading to the ports of Batumi and Poti, carries between 50,000 and 70,000 barrels of Azeri oil per day.

Softer demand

The euro and pound both strengthened slightly against the dollar on Monday after the greenback had enjoyed a strong rally last week.

The falling dollar tends to push oil prices up as investors buy into crude and other commodities as a hedge against inflation.

Oil prices are still well off the peak of $147 a barrel hit in July.

Last week’s forecast by the Opec cartel of oil producing nations that demand would grow more slowly than previously thought in 2008 and 2009 also helped to prevent prices from rising .

News reported by The BBC

Royal Dutch Shell has reported another increase in three-month profits thanks to rising oil prices.

April to June profits came in at $7.9bn (£4.0bn) on a current cost of supply basis, which is 4.6% up on the same period of 2007.

Shell said high oil and gas prices had made up for difficult conditions facing its petrol stations and refineries.

There was no mention of the effects of the four day strike by tanker drivers that disrupted supplies in June.

The drivers eventually accepted a 14% rise in pay over two years.

“Good operating performance, combined with increased oil and gas prices, offset the impact of weaker downstream conditions,” said Jeroen van der Veer, chief executive of Royal Dutch Shell.

Downstream trading includes activities such as marketing, petrol stations and refineries.

The Anglo-Dutch company is the world’s second largest publicly owned energy company by stock market value.

News reported by The BBC