30 March 2010 - Business Week
Royal Dutch Shell Plc, which won contracts last year to develop two Iraqi oilfields, is still in talks on a plan to capture and sell natural gas there, the company’s Middle East vice president for new business said.
“We are still in discussions and waiting for a new government to be in place,” Mounir Bouaziz said in an interview in Abu Dhabi. Shell could start exporting liquid petroleum gas two years after signing a final agreement, he said today.
Prime Minister Nouri Al-Maliki and rivals are seeking to form a governing coalition after Iraq held elections this month. The government agreed with Shell in September 2008 on a project to capture associated gas, which is pumped in conjunction with crude oil, with a view to exporting it in liquefied form.
Shell plans to capture and sell about 700 million cubic feet of gas a day in southern Iraq, making use of fuel that’s currently burnt off, or flared. The country flares more than 1 billion cubic feet of gas a day, or 28 million cubic meters.
Southern Iraq’s associated-gas production may double within three years as the country boosts oil output, Bouaziz said. Iraq awarded oil-service contracts last year to international companies that pledged to raise output to 12 million barrels a day within the decade. The nation pumped 2.39 million barrels a day last month, according to data compiled by Bloomberg.
The gas project may require as much as $10 billion in investment to produce 1.7 billion cubic feet of gas a day, Ahmed Al-Shamma, Iraq’s deputy oil minister for downstream operations, said in September.
As oil production climbs, output of gas may rise to 60 billion cubic meters a year, Bouaziz said, citing a plan developed by Shell for the government between 2005 and 2007. About a third of that may be earmarked for export, Bouaziz said, without giving a timeframe for the production increase.
The first exports of fuel from the Shell project may be in the form of LPG, Bouaziz said. Demand in Iraq, which burns the equivalent of 4,000 tons of LPG a day and imports 1,200 tons, could be met from existing gas supplies, leaving surplus for export, he said.
“Iraq will become a regional player in the gas sector and an exporter to the region and the world,” Bouaziz said. “Iraq is losing $50 a second by flaring gas.”
Meet Domestic Demand
Shell has pledged to meet domestic gas demand to fire power plants, for example, before looking to export the fuel as liquefied natural gas by ship from southern ports.
“What we’ve offered is a well-balanced supply-demand management plan to make sure nothing is wasted,” Bouaziz said.
The project already collects 135 million cubic feet of gas a day and processes it into 500 tons of LPG, Malcolm Brinded, Shell’s executive director for international production and exploration, said Nov. 24.
Mitsubishi Corp., Japan’s largest trading house, said in August it will join the Shell-led initiative by acquiring a 5 percent stake in the joint-venture company running the project. An Iraqi state-run company would own 51 percent, with Shell holding the rest.