Shell approved to gather associated gas in Basra

The Iraqi government has approved Shell's Iraq Gas Master Plan, paving the way for the firm to invest $3-4 billion to gather 500-600 MMcfd of associated natural gas in the southern part of the country.

Sep 8th, 2008

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Sept. 8 -- The Iraqi government has approved Royal Dutch Shell's Iraq Gas Master Plan, paving the way for the firm to invest some $3-4 billion to gather 500-600 MMcfd of associated natural gas in the southern part of the country.

"The Council of Ministers, in an exceptional session, decided to approve an agreement of principles with Shell to invest in the natural gas adjoining oil drilling in Basra," the government said.

Shell will establish a joint-venture company with Iraq's state-owned South Oil Co. (SOC) to execute the gathering, treatment, and monetization operation. SOC will hold a 51% majority stake, while Shell will hold 49%.

The agreement enables rapid development of Iraq's associated gas resources, most of which are being burned off. While Iraq's domestic power industry will use most of the gas; other volumes could be exported as LNG via a floating liquefaction facility off Basra.

According to analyst Global Insight, Shell's involvement in the south could place it in a favorable position for similar associated gas production deals in Iraq's Kirkuk area and perhaps Missan province.

The analyst said the agreement holds "vast potential for Shell and Iraq alike," to move away from wasteful flaring of gas—which the country has no infrastructure or know-how to monetize—to a lucrative opportunity to supply domestic markets and earn export revenues.

Contact Eric Watkins at hippalus@yahoo.com.

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