Draft contractual docuemtns obtained by the Reuters News agency show that the Iraqi government intends to keep associated gas produced in the latest round of from for use in it’s $17 billion Basra Gas Co project with Shell and Mitsubishi.
In technical service contracts – the contractual relationship favoured by Baghdad over production sharing agreements common in the Kurdish region – for the development of the oilfields in southern Iraq in 2009-2010, operators ExxonMobil, BP, CNPC and Eni will surrender all associated gas after that used for re-injection and on-site power generation to the state-owned Southern Gas Company (SGC) for use as feedstock for their joint venture power generation project with Shell and Mitsubishi, and for LNG export of the remainder.
“SGC shall procure that all raw gas produced from the dedicated fields (other than utilized gas but including all NGLs) … shall, on and from commencement of operations, be dedicated solely to the venture,” the contract reads, reports Reuters.
The quantity of proved underdeveloped gas reserves in Iraq is estimated at 113.9 trillion cubic feet by BP, with the vast majoroty being associated gas in the southern oils fields in and around the Basra governate.
There is currently a huge shortage of gas for power generation – as well as power infrastructure – though once this is provided Iraq is likely to have significantly higher output of associated gas than it can consume.
Reuters reports that SGC will be legally obliged to supply at least 85 percent of the agreed volumes, while the Basra Gas Copany will be obliged to take and pay for, or pay for even if not taken, 90 percent of that volume, the contract says.
Providing Iraq’s own modest gas needs are met first, the contract gives BGC the right to build and operate a 4 million-tonne per year (mtpa) LNG terminal and, subject to government approval, another LNG export facility later.
If BGC decides to go ahead with the LNG part, SGC has pledged to supply it with enough raw gas to produce a minimum of 600 million cubic feet per day of LNG feedstock gas within four to seven years of the start up of the gas processing unit, according to Reuters.
A wholly-owned affiliate of Shell will buy all the LNG produced at market prices and would be able to sell it anywhere it chooses for at least 20 years, providing it is not to a country then embargoed by the government of Iraq.
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