Royal Dutch Shell Nearing Gas Agreement With Iraq

Dow Jones reported that a multibillion-dollar deal between Royal Dutch Shell PLC and the Iraqi government to jointly develop domestic gas infrastructure in Iraq's south is moving ahead with a feasibility study that will submitted to government officials before concluding a final deal.

Shell and Iraq's South Gas Co. last fall reached a preliminary agreement to produce gas from oil fields in southern Basra province. According to the agreement Iraq's South Gas Co. will control 51% while Shell will hold the remaining 49%. They will exploit flared associated gas for domestic use and export the rest as LNG via the Arabian Gulf using Iraq's southern ports or by pipelines.

About 600 MMcf/d is burned from Basra oil fields. Iraq wants to use the gas for domestic electricity production and export the remainder. Iraq, which has proven natural gas reserves of 3.15 Tcf, has a daily natural gas production of 1.64 Bcf, 70% of which is flared.