Iraq approves Mitsubishi for role in Shell gas project

Iraq agreed that Mitsubishi will partner Shell in a JV to build the pipe and plant infrastructure needed to exploit associated gas from oil fields around Basra in southern Iraq.

Feb 12th, 2009

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 12 -- The Iraqi government agreed that Mitsubishi Corp. will partner Royal Dutch Shell PLC in a joint venture to build the pipe and plant infrastructure needed to exploit associated natural gas from oil fields around Basra in southern Iraq.

Iraq's Oil Minister Hussein Al-Shahristani, together with other cabinet advisers, gave Shell permission to include Mitsubishi in the project, said a ministry official, who added that a meeting with Mitsubishi would take place "soon."

The approval followed a Feb. 11 meeting between Al-Shahristani, officials of the state-run South Gas Co. and an executive of Shell, which last September signed a preliminary agreement to jointly develop domestic gas infrastructure in the south.

The agreement, valued at $3-4 billion, aims to utilize some 700 MMcfd of gas currently being flared in Basra oil fields.

Under terms announced in September, South Gas Co. will hold 51% of the venture and Shell 49%. Also under the agreement, however, Shell is required to secure an international partner to help with the cost of development.

Mitsubishi, along with other Japanese firms, has benefitted from recent loans made by the government of Japan to Iraq for the improvement of the Arab country's oil and gas industry.

Last July, Japan provided a ¥2.1 billion development loan to upgrade the Basra refinery in Iraq, including the construction of secondary units, such as a fluid catalytic cracker.

The funds were part of Japan's development loans of up to ¥182.7 billion signed by the Japan Bank with Baghdad in January 2008 aimed at restoring war-damaged facilities, including ¥50.1 billion for the oil export plant reconstruction project.

With these loans, Japanese oil and gas firms such as Inpex Holdings Inc., Japan Petroleum Exploration Co., and Mitsubishi have qualified for a preliminary screening of potential bidders for different oil exploration and exploration projects in Iraq (OGJ, July 7, 2008, p. 38).

Last month, Mitsubishi and Galveston LNG Inc.'s subsidiary Kitimat LNG Inc. signed a heads of agreement for the Japanese firm to acquire terminal capacity and an equity stake in Kitimat LNG's proposed LNG export terminal in British Columbia (OGJ Online, Jan. 15, 2009).

Contact Eric Watkins at hippalus@yahoo.com.

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