Iraq cabinet OKs $17.2 billion Shell gas deal
By HASSAN HAFIDH
The Iraqi cabinet Tuesday approved a deal worth up to $17.2 billion for Shell to capture and process gas from three giant southern oil fields - Rumaila, West Qurna phase 1, and Zubair in the southern governorate of Basra, a government spokesman said.
"The cabinet today ratified the Basra Gas Company...in which the (state-run) South Gas Company, Shell and Mitsubishi Corp. participated," Ali Al Dabbagh said in a statement.
Al Dabbadh said the production capacity will be 2 billion cubic feet a day.
The Iraqi Oil Ministry initialed the Iraq South Gas agreements last July with Shell and Japan's Mitsubishi Corp. The deal has been in the council of ministers since for approval.
The 25-year venture calls for an investment of $17.2 billion to create the Basra Gas Company. Baghdad would have a 51% stake, Shell 44% and Mitsubishi 5%.
Some $12.8 billion would be spent on infrastructure and $4.4 billion on construction of a liquefied natural gas facility, according to a document distributed by the Iraqi parliament.
Under the agreement, the company must first meet local demand but can export any gas not used by Iraq's fuel-starved power plants. The planned LNG terminal would handle the export of 600 million cubic feet a day.
The joint venture would sell processed gas to Iraq's state-owned South Gas Company.
According to oil ministry conclusions, Iraq would make nearly $100 billion from the venture because the gas would substitute for the oil currently used to fuel Iraq's power stations.
Iraq would tax Shell and Mitsubishi profits at 35%, Dabbagh said. Iraq would also impose 5% import and 1% export taxes, he added.
Iraq has natural gas reserves totaling 112.6 trillion cubic feet, the 10th largest in the world. However, it produces only around 1 billion cubic feet a day, but some 700 million cubic feet out of which are being flared because of a lack of infrastructure.
Dow Jones Newswires
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