Iraq’s cabinet has approved a long-delayed deal with a consortium led by the UK-Dutch oil major Shell to capture and utilise flared gas from oil fields in the south of the country.
The 25-year venture is estimated to be worth about $17bn, according to government spokesman, Ali al-Dabbagh, Reuters news agency reports.
Shell, Japan’s Mitsubishi and state-owned South Gas Company will now form a joint venture known as the Basra Gas Company.
The deal has been debated in the cabinet since July, when it was initially signed. The consortium signed an agreement with the Oil Ministry in late 2008, but the scheme has faced numerous obstacles in parliament (MEED 1:10:10).
The deal includes the construction of a $4.4bn liquefied natural gas (LNG) export plant, as well as $12.8bn for the construction of gas capture and processing facilities and the rehabilitation of existing facilities at four oil fields. These are Zubair, Rumaila, and West Qurna phases 1 and 2, all in the southern Basra region.
The Shell-Mitsubishi partnership expects an internal rate of return on the project of 15 per cent on an initial investment of $6.98 billion, while SGC plans to put in $3.7 billion of public funds initially and fund the rest through gas sales.