* One of largest Iraq energy deals
* Flared gas to be used to generate power
* Exports possible when domestic needs met
By Ahmed Rasheed
BAGHDAD, Nov 27 Iraq signed a final $17
billion deal with Royal Dutch Shell and Mitsubishi
on Sunday to capture flared gas at southern oilfields,
a project that should boost production of badly needed
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,
"This day represents a historic change in the Iraqi oil
industry ... the best utilisation 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 modernise 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
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
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.
Intermittent electricity is one of Iraqis' major complaints
against their government. Power supply is about half of demand.
The goal of 2 billion cubic feet per day capacity is linked
to peak production at the southern fields, which is expected by
2017, Deputy Oil Minister Ahmed al-Shamma told Reuters.
Existing facilities are currently handling 370 million cubic
feet of gas per day from seven southern fields.
"We expect within a year to complete all the preparation to
process 1 billion cubic feet. The other 1 billion cubic feet
will depend on the increasing production from the three oil
fields," Shamma said.
The project may include the construction of an LNG export
facility with a maximum capacity of 600 million cubic feet per
day. Exports are possible once Iraq's domestic needs are met.
The project needs investment of $17.2 billion, officials
said, including $12.8 billion to rehabilitate existing
facilities and build new ones, and $4.4 billion for the LNG
The Shell-Mitsubishi partnership expects an internal rate of
return on the project of 15 percent on an initial investment of
$6.98 billion, while SGC plans to put in $3.7 billion of public
funds initially and fund the rest through gas sales.
Voser said Iraq is now a substantial part of Royal Dutch
Shell's Middle East portfolio.
"We at Shell, together with our partners, will now start,
after this signing, the work so that we can actually bring
further electricity to the country, but also over time further
revenues by bringing Iraq into the export business of gas," he