Iraq clinches $17 bln flared gas deal with Shell

Sun Nov 27, 2011 11:09am EST
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By Ahmed Rasheed

BAGHDAD (Reuters) - Iraq signed a final $17 billion deal with Royal Dutch Shell (RDSa.L: Quote) and Mitsubishi (8058.T: Quote) on Sunday to capture flared gas at southern oilfields, a project that should boost production of badly needed electricity.

The 25-year project, one of the largest Iraq has signed with foreign energy firms, is meant to help harness more than 700 million cubic feet per day of gas being burned off at southern fields and will ultimately handle 2 billion cubic feet per day, officials said.

"This day represents a historic change in the Iraqi oil industry ... the best utilization of (associated) gas to meet the increasing needs for gas in Iraq," Luaibi said at a signing ceremony attended by Shell Chief Executive Peter Voser.

OPEC member Iraq has signed a series of deals with foreign oil companies to modernize its energy industry after years of war and economic sanctions.

Its official goal to raise production capacity to 12 million bpd by 2017 would vault it into the top echelon of global producers, although officials say 8 million bpd capacity is more realistic.

Increased crude production is expected to bring huge increases in associated gas output and Iraq may soon produce more gas than it can use, opening up the possibility of gas exports.

The Shell deal will involve the creation of the Basra Gas Co joint venture, in which the government will hold 51 percent, Shell 44 percent and Mitsubishi 5 percent.

The project aims to capture gas at Iraq's workhorse field, Rumaila, as well as Zubair and West Qurna.   Continued...