November 15, 2011Iraq cabinet approves $17bn gas deal
Iraq's cabinet on Tuesday approved a $17 billion deal with Royal Dutch Shell and Japan's Mitsubishi Corp to process gas found with oil, which is currently burned off, a government spokesman said.
"The council of ministers approved the establishment of the Basra Gas Company, which will process associated gas from the Rumaila, Zubair and West Qurna-1 oil fields," Ali al-Dabbagh said in a statement.
State-owned South Gas Company will hold 51 percent of Basra Gas, while Shell will have 44 percent and Mitsubishi five percent, Dabbagh said.
He said the total investment would be "$17 billion for a period of 25 years."
"The capacity of the proposed project will be two billion cubic feet," or 56.6 million cubic metres, per day, Dabbagh said.
Continues ...read more ..
The government will impose an income tax of 35 percent on Basra Gas's profits, plus a five-percent import duty on equipment and materials, while a one-percent export duty on the gas will be paid to the State Oil Marketing Organisation, he added.
Ruba Husari, the editor of the Iraq Oil Forum, estimated Iraq's income at $58 billion over the life of the project, from taxes, customs, exports fees, South Gas's share of the profits, and the sale of raw gas to Basra Gas Co.
"But the most important benefit to Iraq is definitely the currently wasted $1.8 billion year worth of gas that is being burnt daily and flared in the air," Husari said.
__
Iraq's
cabinet approved a $17 billion (10.7 billion pound) deal with Royal Dutch Shell and Mitsubishi <8058.T> on Tuesday to capture gas that is now being flared off into the atmosphere at southern oilfields, a government spokesman said.
The 25-year venture is expected to help Iraq make use of more than 700 million cubic feet per day of gas that is being burnt off at three major fields around the southern oil hub of Basra and open the door to the export of liquefied gas.
Capturing flared gas is considered vital to ramping up power production in Iraq, where electricity demand is around double the supply.
"The cabinet approved the deal through establishment of a company called Basra Gas Company, a joint venture of the South Gas Company and the consortium of Shell and Mitsubishi, to capture the flared gas from the fields of Rumaila, Zubair and West Qurna," spokesman Ali al-Dabbagh said.
The Shell contract is one of the largest signed by Iraq as the OPEC-member nation rebuilds its oil industry and economy after years of sanctions and war following the 2003 U.S.-led invasion that toppled Saddam Hussein.
Under the terms of the deal, which Iraq and the companies initialled in July, the government will hold 51 percent of the joint venture with Shell at 44 percent and Mitsubishi 5 percent.
"The value of the contract is $17 billion for 25 years," Dabbagh said.
The Shell joint venture is at the forefront of Iraq's plans to modernise energy facilities as it rebuilds after years of war and international sanctions.
Iraq loses an estimated 1 billion cubic feet per day of gas, mostly from southern fields. The Shell project may eventually handle up to 2 billion cubic feet of gas per day.
Iraqi officials have said the project could include building an LNG export facility with a maximum capacity of 600 million cubic feet of gas per day, so long as Iraq's own gas needs are satisfied first.
An unprecedented Iraqi oil production boom is expected to bring a huge increase in gas output, and analysts say there should soon be more gas than Iraq can consume, opening up the option to export.
A summary of the official agreement obtained by Reuters after the initial signing in July lists a $4.4 billion LNG export unit, in addition to the $12.8 billion estimated cost of rehabilitating existing gas facilities and building new ones, but it does not say when the LNG plant might be built.
The Shell-Mitsubishi partnership expects an internal rate of return on the project of 15 percent 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.
link
