Royal Dutch Shell, Japan's Mitsubishi and Iraqi state-owned South Gas Company have launched a long-delayed project to capture and market gas from some of Iraq's biggest oil fields, Shell said Wednesday, adding that it would be the largest gas project in the country's history and the world's largest flare-reduction project.
The companies have formed a 25-year incorporated joint venture, Basrah Gas Company, to capture associated gas that is currently being flared at the super-giant Rumaila, West Qurna 1 and Zubair oil fields in southern Iraq.
South Gas holds 51% of the joint venture, Shell has 44% and Mitsubishi 5%.
Under an agreement signed with the Iraqi oil ministry, Basrah Gas will sell processed gas to South Gas. The joint venture is to rehabilitate and upgrade current gas facilities in southern Iraq's Basrah oil-producing province and build new facilities. It is expected to increase gas production capacity from the three oil fields to 2 Bcf/d from the current 400,000 Mcf/d.
The project also includes an option to build an LNG plant to export gas once domestic energy needs have been met. However, Basrah Gas Managing Director Gasser Hanter was quoted as saying that the company's main priority is to harness wasted gas resources and provide the Iraqi people with reliable energy.
Shell noted that, although Iraq has estimated gas reserves of 112.6 Tcf, which are the 10th largest in the world, decades of wars and sanctions have led to a deterioration of the country's gas infrastructure, with much of the gas produced from oil fields burned as waste.
"Preliminary estimates indicated that Iraq's losses from gas flaring could amount to billions of dollars annually," it said.
Shell quoted South Gas Director General Ali Khudair as saying that, of about 1 Bcf/d of gas produced in Iraq's southern oil-producing province of Basrah, roughly 700,000 Mcf/d was being flared. The joint venture project would help Iraq develop infrastructure to eliminate gas flaring while providing fuel for Iraqi industry and power generation and generating state revenue, Khudair added.
Under preliminary agreements signed in late November 2011, South Gas and Shell have already increased production capacity from the three fields to 400,000 Mcf/d from 240,000 Mcf/d, and have started a number of critical infrastructure projects in southern Iraq, such as building a new power plant at the Khor al-Zubair gas plant and compressor stations at North Rumaila.
They have also leased compressors to reduce gas flaring at Zubair, Shell said.
Iraq and Shell signed a heads of agreement for the project in 2008. It was delayed in part due to political disagreement over potential gas exports.
