The poor state of Iraq’s gas gathering and processing infrastructure has led to flaring of almost 70 per cent of its associated gas, more than 874 million cubic feet a day (cf/d).
The majority of this is in the south of the country, with more than 755 million cf/d flared. This figure will only rise as international oil companies in the south boost production.
Putting an end to such a wasteful practice will not be easy. Iraq currently lacks the infrastructure to capture and process huge volumes of associated gas. It also does not have the funds or the manpower to go it alone.
It is not hard to see why the Oil Ministry turned to UK/Dutch Shell Group for a solution. The oil major proposed in 2008 to form a joint venture company, that would build a network of gas capture and utilisation facilities across the southern fields. The scheme was intended to provide Iraq with fuel for its power stations and export the excess gas.
Three years later, the deal is no closer to being cleared by the Iraqi cabinet or parliament. Bilaterally negotiated, the deal has been controversial since the beginning.
The parliamentary oil, gas and natural resources committee held a number of hearings in July and August, with expert testimony on what the deal means for Iraq. Questions have been raised on the transparency of the agreement, its feasibility and crucially its cost. The Oil Ministry will have to present a credible response for the project to move forward.