Tuesday, Oct 11, 2011
By Hassan Hafidh
Of Dow Jones Newswires
The Iraqi cabinet is expected to approve soon a multi-billion deal with Royal Dutch Shell PLC (RDSA) to capture and process gas from three giant southern oil fields--Rumaila, West Qurna phase 1, and Zubair, the country's oil minister said late Monday.
The Iraqi Oil Ministry initialed the Iraq South Gas agreements last July with Shell and Japan's Mitsubishi Corp. (8058.TO, MSBHY) and the project is now awaiting the approval by the country's Council of Ministers, or COM.
"There is not any problem concerning the agreement and I think the Council of Ministers will approve it in the next weeks," Abdul Kareem Luaiby told Dow Jones Newswires in an interview.
Last month, the deal was agreed by the High Energy Committee, chaired by Deputy Prime Minister for Energy Affairs Hussein al-Shahristani, and then sent it to the COM for final approval.
The 25-year venture calls for an investment of $17.2 billion to create the Basra Gas Company. Baghdad would have a 51% stake, Shell 44% and Mitsubishi 5%.
Some $12.8 billion would be spent on infrastructure and $4.4 billion on construction of a liquefied natural gas facility, according to a document distributed by the Iraqi parliament.
Under the agreement, the company must first meet local demand but can export any gas not used by Iraq's fuel-starved power plants. The planned LNG terminal would handle the export of 600 million cubic feet a day.
The venture would process associated gas produced from three supergiant Iraqi fields--Rumaila, West Qurna phase 1 and Zubair--all in Basra governorate.
"We are committed to supply the venture with 1.6 billion cubic feet a day from these fields," Luaiby had previously said.
The joint venture would sell processed gas to Iraq's state-owned South Gas Company.
An Iraqi oil expert, who asked not to be named, said Iraq would make nearly $100 billion from the venture because the gas would substitute for the oil currently used to fuel Iraq's power stations.
Iraq would tax Shell and Mitsubishi profits at 35%, he said. The expert said Shell and Mitsubishi will make a 7% profit on the whole venture.
Iraq has natural-gas reserves totaling 112.6 trillion cubic feet, the 10th largest in the world. But it produces only around 1 billion cubic feet a day, but some 700 million cubic feet out of which are being flared because of a lack of infrastructure.
-By Hassan Hafidh; Dow Jones Newswires; +962 799 831 831; hassan.hafidh@dowjones.com
(END) Dow Jones Newswires
11-10-11 1132GMT
