Shell signs Iraqi JV agreement

The Iraqi Ministry of Oil has signed a joint venture agreement with Shell, the South Gas Company and Mitsubishi Corporation on an initiative to capture natural gas in southern Iraq.

The South Gas Company (SGC), an affiliate of the Ministry of Oil, will take 51 per cent in the joint venture, the Basrah Gas Company (BGC). Shell will take 44 per cent and Mitsubishi will take five per cent.

The JV will collect raw gas from the Rumaila, Zubair and West Qurna 1 fields in southern Iraq and process it into products such as natural gas, condensate and liquefied petroleum gas (LPG), initially for sale domestically in Iraq.

By capturing and processing this natural gas, BGC said it aims to create an important and reliable supply of domestic energy, reduce unnecessary greenhouse gas emissions and create significant value for Iraq.

BGC aims to start operation from 2013 at a maximum rate of two billion standard cubic feet of natural gas per day.

Commenting on the deal, Tetsuro Kuwabara, Mitsubishi's senior vice president, said: "Mitsubishi has been doing business in Iraq for over 50 years and are honored to be able to participate in this large-scale energy joint venture with Iraqi Ministry of Oil and South Gas Company. We aim to contribute to the country through the project and hope to further enhance the relationship between Republic of Iraq and Mitsubishi. 

“We have had a long and close alliance with Shell for over 40 years in the global energy sector and are delighted to be the strategic partner in this project. We have a strong support from the Japanese government and government financial institutions such as Nippon Export Investment Insurance."

Around 700 million standard cubic feet per day of natural gas (five million tonnes per year), which is produced by upstream suppliers in association with oil, is currently flared every day in southern Iraq because of a lack of infrastructure to collect it.

Depending on local demand and authority approval, BGC may go on to develop a liquefied natural gas (LNG) facility to export natural gas.