The Basra Gas Company (BGC) consortium has awarded Italian engineering firm Saipem two major design deals for new gas facilities in the south of Iraq.

Saipem will carry out the front-end engineering and design (Feed) for an offshore liquefied natural gas (LNG) production facility and export terminal, sources close to the project tell MEED.

BGC is a joint venture between state-owned South Gas Company, UK-Dutch Shell Group and Japan’s Mitsubishi which aims to capture flared gas from three of Iraq’s southern oil fields. Under its 25-year agreement, the company will rehabilitate and expand new gas infrastructure for associated gas from the Rumaila, West Qurna-1 and Zubair oil fields.

Currently more than 700 million cubic feet a day (cf/d) of gas is flared at the fields. BGC aims to eliminate this, and to install the capacity to process up to 2 billion cf/d of gas.

BGC has already awarded contracts for the inspection, scope definition and execution of rehabilitation of a number of projects. France’s Technip and Japan’s Chiyoda are working on the gas treatment facilities at Khor al-Zubair and North Rumaila. The US’ GE is working on compressors and Saipem on the storage and export terminal at Umm Qasr. The focus is on restoring gas gathering capacity to increase gas to the Iraqi market while ensuring surplus liquids can be exported.

BGC will deliver sales sales, liquid petroleum gas (LPG) and condensates for Iraq’s domestic market and to export surplus gas as LNG. However, with Iraq still suffering from power cuts due to the shortage of gas feedstock, Shell’s export plans have proved controversial ever since it signed a heads of agreement with the Oil Ministry in 2008.

It took until April 2013 for the company to finally incorporated and begin work, but the debates over Iraq’s gas exports continue to be heard. Addressing a Shell official who was speaking at the MEED Iraq energy projects conference on 26 February, Iraq’s Electricity Minister Karim Aftan al-Jumaili declared “it [BGC] is not allowed to export gas. You need to reassess your plans”.

Marco Marsili, BGC’s commercial director reiterated that LNG exports were included as an option in the scope of the company’s agreement with the Oil Ministry, but that gas would be used for the domestic markets first.