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Shell says reduced S.Iraq gas flaring up to 20pc

Istanbul, October 18, 2009

Royal Dutch Shell has reduced gas flaring in southern Iraq by 15 to 20 per cent, and is ready to finalise a deal to develop Iraq's rich gas resources, a Shell executive told Reuters on Sunday.

Shell has negotiated the deal to capture and use gas produced as a by-product of oil extraction at Iraq's southern oilfields, which is otherwise wasted by flaring.

'We've already stopped more than 100 million ... cubic feet per day of flaring,' Mounir Bouaziz, vice president of Shell gas and power, said on the sidelines of an Iraqi oil workshop in Istanbul.

Previously Iraqi fields had been flaring around 700 million cubic feet per day.In September, a senior Iraqi oil official said political opposition to a multibillion dollar gas venture between Iraq, Shell and Mitsubishi might delay it until after national elections in January.

Bouaziz said the joint venture was awaiting final approval from Iraq's oil ministry and that Shell was ready to sign. Once the oil ministry gives the go-ahead, the deal would pass to the cabinet for approval, Bouaziz said.

Shell has already run more than 500 working visits to Iraqi gas installations for checks and repairs, Bouaziz said, and through that work has reduced the flaring.

Shell agreed to undertake work to do what it could to reduce flaring while it and Iraqi officials worked out the details of the final deal. Iraq and Shell signed an initial agreement for the gas project last year.

The gas saved is being pumped into Iraq's southern grid and Shell is receiving no revenue for it, Bouaziz said.

Bouaziz declined to say how quickly Iraq could begin exporting the gas once the full contract comes into effect. The first priority would be to meet domestic Iraqi demand, he said.

Two separate agreements would need to be approved by the oil ministry, he said. One was for the formation of the joint venture between Iraq's state run South Gas Company with Shell and its partner Mitsubishi.

The South Gas Company will own 51 per cent of the venture, Mitsubishi 5 per cent, and Shell the rest.

The second deal would be between the joint venture and the state government for buying the raw gas and selling the processed gas.

Aside from the flared gas, the joint venture would also take delivery of the gas produced at huge new oilfield projects Iraq is undertaking, Bouaziz said.

Foreign oil firms have either signed or are near to signing deals that would nearly triple Iraq's oil output to around 7 million barrels per day (bpd) up from around 2.5 million bpd. A large volume of gas would be produced with the oil.

Shell was working on making gas operations in the south of Baghdad independent of the national power grid. It has repaired an 18 megawatt power plant at the Rumaila field, he said.

Shell was also building a 50 megawatt power plant at Zubair, he added.

Shell had recommended that Iraq form a national gas council, he added. This would include representatives from other ministries that had a stake in gas development, such as the electricity and industry ministries. The council would look to coordinate development of both demand and supply.-Reuters




Tags: Energy | Royal Dutch Shell | Iraq | Gas Flaring |

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