(Updates with Mitsubishi signing in first paragraph.)
Nov. 27 (Bloomberg) -- Iraq, seeking to boost power output after years of conflict and sanctions, completed the final accord for a $17 billion project with Royal Dutch Shell Plc and Mitsubishi Corp. to capture natural gas from its oil fields.
Shell Chief Executive Officer Peter Voser, Mitsubishi Senior Vice President Tetsuro Kuwabara and Iraqi Oil Minister Abdul Kareem Al-Luaibi signed the agreement to save and produce gas that is currently flared off in southern Iraq.
“This is a new chapter in the gas industry in Iraq,” Voser said today at a ceremony in Baghdad.
Iraq holds the fifth-biggest gas reserves in the Middle East and wants to produce more as fuel for power stations, which have been unable to meet domestic demand since the 2003 U.S.-led invasion that toppled President Saddam Hussein. The country hopes eventually to export gas, Al-Luaibi said.
Under the 25-year accord, Iraq’s government will hold a 51 percent stake in a venture called South Gas Co., while Shell will have 44 percent and Mitsubishi the rest. South Gas will help collect more than 2 billion cubic feet (57 million cubic meters) of fuel a day at the Rumailah, Zubair and West Qurna fields, Deputy Oil Minister Ahmad al-Shamaa said Nov. 16.
Shell, Europe’s largest oil company, had been in talks with the Iraqi government since 2008 about gathering so-called associated gas that occurs naturally underground with crude. The Shell-Mitsubishi venture will have an initial capital of $20 million.
Fourth Licensing Round
Iraq’s production of gas and electricity suffered from decades of war, sabotage and economic sanctions, and the nation needs foreign investment and expertise to increase output. The government has signed 15 licenses for the development of energy resources, including three for gas, since 2008, and plans a fourth licensing round of oil and gas rights for March. OPEC- member Iraq has the world’s fifth-largest reserves of crude, including Canada’s oil sands, according to BP Plc.
Iraq burns off more gas as a percentage of production than any other country, losing $5 million 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 program. The nation ranks fourth for the amount of gas it flares, behind Russia, Nigeria and Iran, Dupin said Sept. 29.
Iraq’s flaring of associated gas has increased to 10 billion cubic meters a year from 3 billion in 1994, in tandem with the country’s rising production of crude, Dupin said.
--With assistance from Nayla Razzouk and Anthony DiPaola in Dubai. Editors: Bruce Stanley, Sharon Lindores
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