Iraq Gas Deal With Shell Seen by Year End

Source: Reuters 11/26/2010, Location: Middle East

A multibillion-dollar final deal between Iraq and Royal Dutch Shell to capture flared gas at southern oilfields is expected to be signed before the end of the year, a senior Iraqi oil official said.

The $12 billion deal, a venture between Iraq's South Gas Company, Shell and Japan's Mitsubishi, involves the capture of associated natural gas produced at fields near the oil hub of Basra, including Rumaila, Iraq's workhorse.

"We hope to sign the agreement after it is ratified by the cabinet before the end of the year," Ali Khudhier, director general of South Gas Company, told Reuters on the sidelines of an oil and gas conference in Basra.

Deputy Oil Minister Ahmed al-Shamma told reporters the final draft of the deal would be completed within 10 days.

Last month Oil Minister Hussain al-Shahristani said the contract would not include the supergiant 12.6-billion-barrel Majnoon oilfield, which is being developed by Shell and Malaysian partner Petronas.

Khudhier said associated gas from Majnoon could be developed by the South Gas Company.

"As long as there are gas facilities then why don't we utilize the project?" he said.

Final Deal
Iraq's deal with Shell and Mitsubishi will cover Rumaila, being developed by BP and CNPC; Zubair, being worked on by ENI Occidental and KOGAS and West Qurna, whose two projects are in the hands of Exxon and Shell, and Lukoil and Statoil.

The joint venture known as the Basra Gas Company will deal only with the South Oil Company when utilizing and buying the gas and will not have direct contact with the international firms developing the three fields, Khudhier said.

The Oil Ministry delayed finalizing the deal in September because of legal issues about the joint venture.

Iraq flares 1 billion cubic feet of gas daily at its oilfields -- fuel it needs to generate electricity in a country suffering chronic power blackouts more than seven years after the U.S.-led invasion.

Shamma said earlier on Friday Iraq's current cabinet has the authority to sign the contract.

"The current government will continue its work until there is a new government," Khudhier said.

Iraqi politicians have been jockeying for position in a new government since an election in March that failed to produce a clear winner. Two weeks ago the squabbling factions reached a power-sharing deal and Prime Minister Nuri al-Maliki was given 30 days to pick a new cabinet.

Meanwhile, initial production from Iraq's Siba gas field in Basra is expected within two to three years, Khudhier said.

Iraq earlier this month signed an initial deal with Turkey's TPAO and Kuwait Energy Company to develop the field.


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