(Updates with field names in fourth paragraph.)
Nov. 15 (Bloomberg) -- Iraq approved a $17-billion contract with Royal Dutch Shell Plc and Mitsubishi Corp. for the capture of natural gas at three oil fields in the south of the country, a government spokesman said.
Iraq has a 51 percent stake in the venture known as South Gas Co., Ali Al-Dabbagh said today by phone. Shell has a 44 percent stake, while Mitsubishi owns the rest, he said by telephone from Baghdad. The agreement is for 25 years, according to Al-Dabbagh.
Iraq, holder of the fifth-biggest natural-gas reserves in the Middle East, is struggling to restore power capacity after years of conflict and economic sanctions. The captured gas will supply domestic needs and may be exported at a later stage, Hans Nijkamp, Shell’s country chairman for Iraq, said Sept. 29.
“The cabinet approved it today and thus gave its green light to this $17 billion project,” he said. The venture will help collect more than 2 billion cubic feet a day (57 million cubic meters a day) from the Rumailah, Zubair and West Qurna fields, said Al-Dabbagh, who is one of the country’s state ministers.
Shell, Europe’s largest oil company, has been in talks with the government since 2008 to gather gas that is currently flared. The preliminary agreement for the new venture was signed on July 12.
Fourth Licensing Round
Iraq has signed 15 licenses for the development of energy resources, including three for gas, since 2008, five years after the U.S.-led invasion that ousted the regime of then President Saddam Hussein. It plans a fourth licensing round of oil and gas exploration rights for March.
Iraq burns off more gas as a percentage of output than any other nation, losing $5 million dollars a day, according to Fabrice Mosneron Dupin, an adviser at the Sustainable Energy, Oil, Gas and Mining Division of the World Bank-led Global Gas Flaring Reduction initiative. The country ranks fourth for the amount of gas it flares, behind Russia, Nigeria and Iran, Dupin said on Sept. 29.
Iraq’s flaring of associated gas, which occurs naturally with oil underground, has increased to 10 billion cubic meters a year from 3 billion in 1994, in tandem with the country’s rising production of crude, he said.
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