Iraqi Cabinet approves initial gas deal with Shell

BAGHDAD (AP) -- Iraq's Cabinet approved an initial gas agreement Sunday between the Oil Ministry and Royal Dutch Shell PLC to invest in a joint venture to tap natural gas in southern Iraq, a government statement said.

The agreement calls for establishing a joint venture between the state-run South Oil Co. and Shell to exploit the fields, the statement added without any other details.

In June, Oil Minister Hussain al-Shahristani told parliament that Iraq was expected to finalize a deal this summer that would enable it to exploit flared associated gas for domestic use and exports.

Shell had approached the Oil Ministry in December with its plans and since then meetings have been held outside Iraq, mainly in Damascus, Syria.

Shell is expected to invest $3 billion to $4 billion over five years to gather at least 500-600 million cubic feet of flared gas per day from the southern fields.

The state-run South Oil Co. is expected to control 51 percent of the venture, while Shell would hold the remaining 49 percent.

The agreement provides for construction of a number of liquefied natural gas facilities, the statement said.

According to Iraqi oil officials, Iraq loses approximately $40 million worth of natural gas each day because it is either re-injected into wells or burned due to a lack of sufficient infrastructure to exploit it for consumption or export.

The agreement would be Iraq's second major hydrocarbon deal since the U.S.-led invasion of 2003 that toppled Saddam Hussein.

Last week, the Cabinet approved a $3 billion deal with China to develop the Ahdab oil field in southern Iraq.

Under the contract, China National Petroleum Corp. will develop the field for 20 years. It's expected to produce up to 25,000 barrels per day after three years, and eventually reach 125,000 barrels per day.

The ministry also said it was negotiating with Shell to conduct output tests for the Akkas gas field in western Iraq, which has 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.

Shell is also negotiating a one-year service contract with the Iraqi Oil Ministry to develop Missan and Kirkuk oil fields. It is one of at least five contracts Iraq is negotiating with oil majors to boost its current output of 2.5 million barrels per day.

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.


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