Baghdad studies giant's plan to build floating export facility
Iraq is considering a proposal by Shell to build a gas-gathering system in the country's south and set up a floating liquefaction facility to export liquefied natural gas.
Iraqi Oil Minister Hussain al-Shahristani confirmed the proposal was received last week and said a response would be sent to the supermajor soon following a review in Baghdad.
"It's a multi-billion project...a huge project," he said.
Shell has made "various proposals" to the Iraqis "to either develop their oilfields or to set up gas projects both for domestic gas supplies and exports", Shell chief executive Jereon van der Veer said.
Shahristani said the gas proposal would involve associated gas from the southern oilfields and floating liquefaction facilities in the northern Persian Gulf, where Iraq has its main crude exporting terminals.
The gas would be gathered from the southern oilfields and processed to supply the domestic market, with further amounts being exported, he said.
Projected LNG amounts are not specified, but Shahristani said initial gas volumes would involve the 600 million cubic feet per day of associated gas now being flared.
With the planned increases in oil production to 6 million barrels per day over the next five years, associated gas production would increase to 2 billion cubic feet per day and an eventual 4 Bcfd, he said.
He did not spell out Iraq's domestic gas requirements.
Shahristani said there was "no decision yet" on the Shell proposal, which if realised would make the floating facility the first such in the world.
A floating LNG plant would present technical and other challenges, but might be considered an attractive arrangement for a country where insurgent attacks since the US and UK military occupation of 2003 have created such insecurity that no foreign oil company has been willing to carry out any work on the ground, except in the relatively safer northern Kurdish regions.
By locating the planned liquefaction facilities offshore, Shell might be able to insulate itself against potential violence on the mainland.
Creating the necessary network of gas gathering pipelines at Iraq's southern fields would require some presence on the ground, but the southern Shia-dominated regions are considered much safer than the violence-prone central oil-producing fields.
VAHE PETROSSIAN and CHRISTOPHER HOPSON
© Upstream 2008
