Shell to hold talks on gas deal with Baghdad

10 February 2009

Baghdad will meet with UK / Dutch energy major Shell Group on 11 February to revise the terms of an associated gas development deal which could lead to the formation of a joint venture by the end of 2009.

The discussion will focus on progress made by Shell since a heads of agreement was signed in September 2008. It will also consider a potential increase in the tax Baghdad levies on the project, the possible entry of Japan’s Mitsubishi Corporation to the deal, and what discounts could be offered to domestic customers.

“It’s a mini-conference to see what our stand is towards the Shell agreement, to discuss what Shell have done so far and what happens next,” Abdul Hadi Al Hasani, deputy chair of Iraq’s Oil and Gas Parliamentary Committee told MEED on the sidelines of the Chatham House Middle East Energy meeting in London on 10 February. “We believe Shell will be flexible on the agreement.”

Al Hasani said that a final decision on the project and the formation of a joint venture between Shell, Mitsubishi and state-owned South Oil Company will be complete “by the end of the year”.

The existing heads of agreement covers the development of associated gas in Basra, with the aim of gathering 700 million cubic feet a day (cf/d) of natural gas from the major southern oil fields.

The planned entry of Mitsubishi into the agreement, with a minimum share of 10 per cent, is to avoid Shell having a monopoly on natural gas supplies from Basra, Al Hasani said.

Mitsubishi have worked with South Oil in the past, supplying the company with compressor units.

South Oil will remain a 51 per cent stakeholder in the agreement, Al Hasani added.

He said that an increase in tax on the project, from 15 per cent to 35 per cent, will also be under discussion, as will potential discounts to domestic consumers, the primary focus of the project.

The joint venture will own and operate existing gas gathering, treating and processing facilities, invest in repairing other assets, and develop new facilities, according to earlier reports in MEED (22:9:08).

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