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Iraq delays inking gas deal with Shell

By Bibhu Pattnaik AMMAN: A planned $12.5 billion natural-gas agreement between Iraq and partners Royal Dutch Shell and Mitsubishi Corporation has been delayed indefinitely, a spokesman for the country's Oil Ministry said yesterday.

"The agreement was due to be signed today in Baghdad, but it has been delayed indefinitely," Murtada Al Jashaami said in a telephone interview from Iraq's capital. He did not give a reason for the latest delay in a signing that has been expected since last year. Telephone calls to senior Iraqi Oil Ministry officials and an e-mail to Shell weren't immediately returned.

Iraq has the fifth-biggest gas reserves in the Middle East and the world's fifth-largest crude oil reserves, according to data from BP. While the government relies on sales of crude for most of its revenue, it wants to produce gas to fuel the nation's power plants, which have been unable for several years to meet demand.

Production of electricity and gas, like oil, suffered from decades of war and sanctions, and Iraq is seeking foreign investment and expertise to boost output.

The joint project with Shell and Mitsubishi involves developing and capturing gas that is being flared, or burned off, in southern Iraq.

Some 700 million cubic feet are flared daily in the south of Iraq and the quantity is sufficient to generate an estimated 4,500 megawatts, Hans Nijkamp, a Shell vice president and country chairman, said.

Addressing delays in the project since the original contract was signed last year, Nijkamp said at the time that "a number of external reviews have been carried out by international firms on behalf of the Ministry of Oil, and it has also taken Shell 250,000 engineering man-hours on site to assess the scope of work."

The signing for this gas-capture project has been delayed since June 2010, when the government approved the creation of a venture to be called Basra Gas. State-owned South Gas would have a 51 per cent stake in the venture, with Shell holding 44 per cent and Mitsubishi the remainder.

Most of Iraq's associated gas, which is pumped in conjunction with crude oil, is flared. The country flares more than 1 billion cubic feet of gas a day, or 28 million cubic meters.

Shell, which won contracts in 2009 to develop two Iraqi oil fields, gathers daily 135 million standard cubic feet of natural gas and 500 metric tonnes of liquefied petroleum gas (LPG), that had previously been flared, Mounir Bouaziz, Shell's Middle East vice-president for new business, has said.

The government, which hopes eventually to produce enough gas to export, awarded three licences last November in the nation's first auction of gas concessions since the United States-led invasion in 2003. Iraq has also signed 12 oil licenses since 2003 and has asked companies to begin submitting bids for a new, round of exploration rights.

© Times of Oman 2011