Iraq's cabinet has approved a multi-billion dollar deal with Royal Dutch Shell and Japan's Mitsubishi Corp. The deal, signed on Tuesday, will provide much needed electricity from natural gas that is currently being burned off.
The State-owned South Gas and Basra Gas companies in southern Iraq will take a 51 percent stake in the contract, with Shell taking 44 percent, and Mitsubishi taking a 5 percent share.
Lacking the technology needed to capture the gas for power generation, Iraq produces a negligible quantity of gas compared with the size of its reserves, and currently flares off most of what is produced as a by-product of its crude oil production.
The joint deal with Shell and Mitsubishi will exploit gas in the Rumaila, Zubair, West Qurna and Majnoon fields near Basra.
At the time said the deal was first proposed in 2008, the government expected it to be worth around $4bn, but no specific financial figures were given on Tuesday.
As we reported recently, Iraq has invited international energy firms to submit bids in an auction for three gas fields, in a third major tender aimed at developing the war-torn state's oil and gas sectors.
Existing power plants in Iraq have proved incapable of generating sufficient electricity to meet peak summer demand, forcing draconian rationing that sees consumers receive supply for one hour in five, or less.
Iraq's LNG reserves are estimated at 110 trillion cubic feet.
(Sources: AFP, WSJ)