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Iraq in talks with Royal Dutch Shell on joint venture deal to invest natural gas

International Herald Tribune

Iraq in talks with Royal Dutch Shell on joint venture deal to invest natural gas

BAGHDAD: The Iraqi Oil Ministry is negotiating with Royal Dutch Shell on a joint venture deal to develop natural gas associated with oil production in southern Iraq, two officials said Tuesday.

The head of the Basra Economic Development Committee, Munadhil Abid Khanjar, said that Shell had approached the Oil Ministry last December with its plans and since then meetings have been held outside Iraq.

The latest was nearly two weeks ago in Damascus, Syria, Khanjar added.

He said Iraq loses approximately US$40 million worth of natural gas a day as it is either re-injected into wells or burned due to a lack of sufficient infrastructure to use it for consumption and export.

Basra is Iraq’s second-largest city and located 550 kilometers (340 miles) southeast of Baghdad. Oil output in southeastern Iraq is around 2 million barrels per day, accounting for about 80 percent of Iraq’s total output.

A Shell spokesman, Adam Newton, said he was looking into the report.

A senior official with the Iraqi Oil Ministry in Baghdad said Shell is expected to invest US$3 billion to US$4 billion in five years to gather at least 500-600 million cubic feet a day of flared gas from the southern oil fields.

The official, who spoke on condition of anonymity as he was not authorized to release information before the deal is finalized, added the state-run South Gas Co. would control 51 percent in the venture while Shell would hold the remaining 49 percent.

The building of number of liquefied natural gas (LNG) facilities could be included.

Earlier this month, Iraq’s Oil Minister Hussain al-Shahristani announced to parliament that Iraq is expected to finalize a deal this summer that would enable Iraq to make use of flared associated gas for domestic uses and exports.

The ministry also said it was negotiating with Shell to conduct output tests for the Akkas gas field in western Iraq with estimated reserves of more than 2.15 trillion cubic feet.

The field, which has five wells that are ready to be interconnected, could produce up to 50 million cubic feet a day as a first stage and could be increased to 500 million cubic feet a day, it said. Gas would be pumped through Syria and Turkey to consumers in Europe.

Iraq has the world’s third-largest oil reserves with an estimated 115 billion barrels. It also sits on an estimated 112 trillion cubic feet of natural gas reserves, according to the ministry.

http://www.iht.com/articles/ap/2008/06/17/business/ME-FIN-Iraq-Natural-Gas.php

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