Iraq is poised to finalise a $1 billion-plus deal with a consortium of US companies Bechtel, Honeywell and Turkey’s Enka to build a new gas plant capable of producing 300 million cubic feet of associated gas per day from its southern fields.

Oil Minister Thamer Ghadhban expects the engineering, procurement and construction agreement to be signed before the end of the year, boosting efforts to harness more associated gas and reduce flaring.

“We have signed a memorandum of understanding (valid) for three months. We hope by the end of the year, we finalise and sign the contract. It’s an EPC plus finance. We’re negotiating, it will be in excess of $1 billion, no doubt,” Ghadhban said on the sidelines of the World Energy Congress in Abu Dhabi.

The Honeywell group sealed the memorandum of understanding with the South Gas Company in July to build the plant in the Al-Ratawi area of southern Iraq. It will capture associated gas from the West Qurna-2, Majnoon, Luhais and Tuba oilfields as part of gas expansion plans to provide more fuel for power generation.

The Honeywell-led consortium had been competing against an alliance of Russia’s Lukoil and France’s Total to build the processing facilities to boost supplies to the domestic grid.

Lukoil is developing West Qurna-2, which is currently pumping 400,000 barrels per day of oil.

Meanwhile, the Shell-led Basra Gas Company (BGC) is also expected to sanction a new gas processing train, the fifth such facility, to capture more gas from the giant Basra oilfields awarded under the country’s first licensging round in 2009.

The expansion will push BGC’s combined production to 1.5 billion cubic feet per day from around 900 MMcfd currently.

Shell, which in January embarked on the current expansion phase involving the addition of two new trains, each capable of delivering 200 MMcfd, has now decided to add a new replica processing facility.

The final investment decision on the additional train is expected later this year.

The two new trains, under construction in Sharjah, in the United Arab Emirates, by US company Exterran, are in the process of being shipped to Al-Ratawi near Basra for installation by China Petroleum Engineering & Construction Corporation (CPECC).

They will be operational by 2022, according to BGC officials.

Despite Shell’s success at harnessing associated gas, Iraq continues to flare more than half of its combined production. It sends more than 1.5 Bcfd up in smoke since it lacks enough capacity to handle associated gas.

Shell is a partner in BGC with the state-run South Gas Company, which has a 51% stake in the joint venture, and Japan’s Mitsubishi, which owns 5%. BGC has dramatically reduced gas flaring at the Rumaila, West Qurna-1 and Zubair oilfields, operated respectively by BP, ExxonMobil and Italy’s Eni.

As part of its flaring-reduction campaign and efforts to boost power generation, Iraq has also awarded contracts to other companies including CPECC to harness associated gas from southern Iraqi fields.

CPECC was recently selected to build and operate facilities to process 300 MMcfd from Halfayah, operated by PetroChina.

Elsewhere, GE-controlled Baker Hughes is building facilities to produce at least 200 MMcfd by capturing gas from the Nassiriya and Gharraf fields.

Apart from the environmental benefits, the gas expansion schemes will help Iraq save money by reducing costly gas imports from Iran.

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Iraq set to clinch deal with trio to build gas plant