Deal: Iraq and Shell sign agreement
Iraq signs gas deal with Shell
Iraq has signed a multi-billion dollar natural gas deal with supermajor Shell, the second major energy deal agreed with a foreign company since the US-led invasion in 2003.
Oil Minister Hussain al-Shahristani described the deal as an initial agreement that he said was worth "some billions" of dollars. It was unclear when a full deal would be signed.
The agreement is between the energy giant and the state-run Southern Gas Company for a joint venture in Basra province in Iraq's south. Under the terms of the deal, Iraq will hold 51% in the venture and Shell 49%.
"We have signed an initial agreement for a joint venture between the Southern Gas Company and Shell," said Shahristani.
A senior Shell executive, Linda Cook, said the company will open offices in Baghdad and Basra, which could make it the first Western oil company to do so in years, said a Reuters report.
The deal includes the capture of natural gas released as a by-product of crude oil extraction as well as the rehabilitation of gas facilities in Basra.
Shell is also expected to produce dry gas as well.
"This (joint venture) company will stop the burning of gas as quickly as possible and will start to produce dry gas. Iraq will become one of the world's key LNG exporting countries," Shahristani added.
Shell will also construct new gas facilities to process the by-product gas, some 700 million cubic feet of which Iraq burns off, or flares, each day, the Oil Ministry has said. Shell will buy some of the gas itself.
Iraq has said it wants to focus on development of its gas fields and plans to become a major supplier to Europe.
Iraq's proven natural gas reserves are 112 trillion cubic feet, while probable reserves are closer to between 275 and 300 trillion cubic feet, a 2007 report from the US government's energy statistics unit said.
Iraq recently agreed a $3 billion oil service contract with China, the country's first major oil deal with a foreign firm since the fall of Saddam Hussein more than five years ago.
Buoyed by sharp drops in violence, Iraq opened its giant oil and gas fields to foreign firms on 30 June, announcing long-term development contracts with a view to raising oil output by a combined 1.5 million barrels per day at those fields.
Iraq wants to raise total oil output to 4.5 million bpd by 2013, from around the current 2.5 million bpd.
Baghdad has said it wants to sign the long-term development contracts by mid-2009.
Shahristani will meet energy companies bidding for those oil and gas service contracts in London next month to discuss details of the fields on offer as well as contract terms, the Oil Ministry has said.