Iraq, Royal Dutch Shell to ink gas deal

September 23, 2008

BAGHDAD (AP) — Iraq and Royal Dutch Shell PLC on Monday will formally launch plans to invest in a joint venture to tap natural gas in southern Iraq, a government spokesman said.

Iraqi Oil Minister Hussein al-Shahristani will sign the deal with executives from the Anglo-Dutch company at the Cabinet’s offices in the heavily fortified Green Zone in Baghdad, his spokesman said.
A joint venture with the state-run Iraqi South Oil Co. will then be established to invest in natural gas in the southern oil-rich province of Basra, the spokesman Assem Jihad said.
Iraq will control 51 percent of the venture, while Shell will hold the remaining 49 percent in the company, which will exploit flared associated gas for domestic use and exports.
“Financial, legal and technical experts from both sides will start immediately to draw up the plans and basis for the new company that will run this operation,” Jihad told The Associated Press in a phone interview.
“The agreement will help Iraq to make use of about 700 million cubic feet which is being flared everyday to process it and to meet the domestic needs and to export the surplus to the world gas market,” he added.
Basra is Iraq’s second-largest city, 340 miles southeast of Baghdad.
Earlier this month, the Iraqi Cabinet approved the agreement following nearly eight months of discussions between Iraqi oil officials and Shell. Monday’s ceremony will finalize the deal.
Shell is expected to pump $3 billion to $4 billion over five years to gather at least 500-600 million cubic feet of flared gas per day from the southern fields.
The agreement also provides for construction of a number of liquefied natural gas facilities, the statement said.
According to Iraqi oil officials, Iraq loses about $40 million worth of natural gas each day because it is either re-injected into wells or burned due to a lack of sufficient infrastructure to exploit it for consumption or export.
The agreement will be Iraq’s second major hydrocarbon deal since the U.S.-led invasion of 2003 that toppled Saddam Hussein after the approval of the $3 billion deal with China to develop the Ahdab oil field in southern Iraq.
Under the contract, China National Petroleum Corp. will develop the field for 20 years. It’s expected to produce up to 25,000 barrels per day after three years, and eventually reach 125,000 barrels per day.
Iraq has the world’s third-largest oil reserves with an estimated 115 billion barrels. It also sits on an estimated 112 trillion cubic feet of natural gas reserves, according to the ministry.