Reuters reported that Iraq signed final USD 17 billion deal with Royal Dutch Shell and Mitsubishi to capture flared gas at southern oilfields a project that should boost production of badly needed electricity.
Officials said that the 25 year project, one of the largest Iraq has signed with foreign energy firms is meant to help harness more than 700 million cubic feet per day of gas being burned off at southern fields and will ultimately handle 2 billion cubic feet per day.
Mr Abdul Karim Luaibi oil minister of Iraq said that this day represents a historic change in the Iraqi oil industry the best utilization of associated gas to meet the increasing needs for gas in Iraq.
OPEC member Iraq has signed a series of deals with foreign oil companies to modernize its energy industry after years of war and economic sanctions. Its official goal to raise production capacity to 12 million barrel per day by 2017 would vault it into the top echelon of global producers although officials say 8 million barrel per day capacity is more realistic.
Increased crude production is expected to bring huge increases in associated gas output and Iraq may soon produce more gas than it can use, opening up the possibility of gas exports. The Shell deal will involve the creation of the Basra Gas Company joint venture in which the government will hold 51% Shell 44% and Mitsubishi 5%.
Mr Ahmed al Shamma deputy oil minister said that the project aims to capture gas at Iraq's workhorse field Rumaila as well as Zubair and West Qurna. Intermittent electricity is one of Iraqis major complaints against their government. Power supply is about half of demand. The goal of 2 billion cubic feet per day capacity is linked to peak production at the southern fields which is expected by 2017.
Existing facilities are currently handling 370 million cubic feet of gas per day from seven southern fields. We expect within a year to complete all the preparation to process 1 billion cubic feet. The other 1 billion cubic feet will depend on the increasing production from the three oil fields.
Mr Shamma said that the project may include the construction of an LNG export facility with a maximum capacity of 600 million cubic feet per day. Exports are possible once Iraq's domestic needs are met. The project needs investment of USD 17.2 billion including USD 12.8 billion to rehabilitate existing facilities and build new ones and USD 4.4 billion for the LNG export unit.
The Shell Mitsubishi partnership expects an internal rate of return on the project of 15% on an initial investment of USD 6.98 billion while SGC plans to put in USD 3.7 billion of public funds initially and fund the rest through gas sales.
(Sourced from Reuters)
