Shell to set up gas JV in Iraq

Royal Dutch Shell and the Iraqi oil ministry aim to sign a preliminary agreement this summer to establish a Joint Venture to exploit associated gas and channel it for domestic use and export. Plans include building LNG export facilities. Once signed, the heads of agreement would kick-start the engineering and project management work. Construction would begin once a final deal is inked. Finalisation is expected to take at least a year.

Under the constitution, gas resources, like oil, are state property. The south gas utilisation agreement would follow on from the master gas plan that Shell drew up for Iraq in 2006, which provided a blueprint for gas industry development. Iraq's proven gas reserves are estimated at nearly 112 trillion cubic feet - making it the world's fifth-largest gas resource holder.

Industry sources estimate that 600MMcf/d of flared raw gas could yield about 480MMcf/d of dry gas, 3,420 tons per day of LPG and about 660 tons, or nearly 5,000 barrels, of condensate daily. Those volumes could turn Iraq from an importer to a net exporter of LPG, meeting about 60% of current domestic LPG demand, and provide gas for about 60% of current power generation demand. Revenues from exports of 400MMcf/d of LNG could yield at least $1 billion per year at current prices.

The ministry plans to tender long-term oil development contracts to international companies this year. These would cover the major southern producing fields, as well as the giant Kirkuk oil field in the north and the western Akkas gas field.