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Shell, Iraq Sign Agreement for $17 Billion Project to Develop Natural Gas

By Kadhim Ajrash and Khalid Al-Ansary – Nov 27, 2011 2:08 PM GMT

Iraq, seeking to boost power output after years of conflict and sanctions, signed the final accord for a $17 billion project with Royal Dutch Shell Plc (RDSA) to capture natural gas at oil fields.

Shell Chief Executive Officer Peter Voser and Oil Minister Abdul Kareem Al-Luaibi signed the agreement to produce gas that is currently flared off at fields in southern Iraq, in a ceremony today in Baghdad.

Under the 25-year agreement, the government will hold a 51 percent stake in a venture called South Gas Co., while Shell will have 44 percent. Mitsubishi Corp. (8058) is also a partner in the project and will hold the rest. South Gas will help collect more than 2 billion cubic feet (57 million cubic meters) of fuel a day at the Rumailah, Zubair and West Qurna fields in southern Iraq, Deputy Oil Minister Ahmad al-Shamaa said Nov. 16.

Iraq holds the fifth-biggest gas reserves in the Middle East and wants to produce more as fuel for power stations, which have been unable to meet domestic demand since the 2003 U.S.-led invasion that toppled President Saddam Hussein. The country hopes eventually to produce enough gas to export.

To contact the reporter on this story: Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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