UPDATE: Iraq Oil Report has tweeted that the deal may be postponed, saying “Shell gas jv supposed to receive draft signing tomorrow, now postponed. No clue why. Story of this deal since 2008”. More details to follow.
Follow initial reports, Reuters have confirmed that Shell and Mitsubishi will sign a long-awaited gas capture deal with the Iraqi government on Tuesday.
Reuters, citing statements from two sources close to the deal, reports that Iraq’s oil ministry, Shell, and Japanese project partner Mitsubishi have solved differences that had delayed the 25-year joint venture since a draft agreement was struck in 2008.
The deal will finally progress the mammoth project needed to caputre the vast amounts of natural gas flared in southern Iraq for want of infrastructure. The country and the oil industry both desperately need new sources of energy for power generation.
“We have agreed on everything. The initial signing is on Tuesday,” an Iraqi oil source told Reuters.
The final version of the contract, which has been held up by legal problems and political disagreement, will be sent to the cabinet for approval after it is initialled this week, another source close to the deal said.
The joint venture, named Basra Gas Co, would be at the forefront of Iraq’s plans to modernise its energy facilities and boost oil exports that hover around levels seen before the U.S.-led invasion in 2003. The Iraqi government will hold 51 percent of the venture, according to Reuters.
Iraq has struggled for years with power blackouts and risks years of electricity shortages until associated gas from vast oil fields in the south is captured and fed to new power plants.
Iraq is losing 1 billion cubic feet per day of gas through flaring, mostly from the south. Iraq would use the gas produced under the agreement with Shell in the domestic market to help meet rapidly rising demand for electricity and could export any surplus. Analysts estimate that the gas capured under the deal could generate power equivalent to 10% of total UK daily energy demand.
It is not sure at present how much gas will reach Iraq’s national grid, as the international oil firms who secured massive operating contracts in the south in the first auction round following the second Gulf War are not obliged to give up their associated gas, which they use for local power generation and improved oil recovery.
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