Iraq signs $17-bn gas deal with Shell, Mitsubishi

Iraq, holder of the world's 10th gas reserve, yesterday signed a $17-billion deal with Royal Dutch Shell and Mitsubishi Corp to capture and produce gas from three major oilfields that is currently being flared because of a lack of infrastructure to collect it.

Some 700 million cubic feet of gas is currently burned off each day in these oilfields, which at current prices, is worth about $1.8 billion per year and creates greenhouse gases each year that is equivalent to what is emitted by 3.5 million cars.

"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," Abdul-Kareem Luaibi, Iraqi's oil minister, said at a signing ceremony that was attended by Peter Voser, Shells chief executive.

In September 2008, Shell signed a preliminary agreement with the Iraqi oil ministry to establish a joint venture between Shell and Iraq's state-owned South Gas Company for the gas gathering project.

Under the 25-year deal, South Gas Company will hold a 51-per cent stake in the venture called Basrah Gas Company (BGC), while London-based Shell will hold 44 per cent and Japanese conglomerate Mitsubishi the remaining 5 per cent.

BGC will help capture more than 2 billion cubic feet of gas a day at the Rumailah, Zubair and West Qurna fields in the southern part of the country.