Iraq’s $12.5 billion natural gas production venture with Royal Dutch Shell Plc may be able to start exporting the fuel by 2015 when output from the country’s southern fields meet domestic demand, the government said.
Gas output will probably exceed the nation’s domestic demand for power generation by 2015 or 2016, according to a statement for government spokesman Ali al-Dabbagh today. Once achieved, Shell can export the fuel in liquid form, Iraq said.
Middle Eastern states are seeking to develop their natural gas reserves to use the fuel to fire power plants and boost economic growth. Iraq is still trying, after seven years of conflict and prior sanctions, to restore power generation capacity to levels achieved before the U.S.-led military invasion of 2003.
The country’s cabinet yesterday approved the creation of the Basra Gas Co. joint venture including Shell and Mitsubishi Corp. along with state-owned South Gas Co., which will hold a 51 percent stake in the business. Shell first agreed with the government in September 2008 on a project to capture associated gas from Iraq’s southern oil fields with a view to exporting it.
Associated gas is pumped in conjunction with crude and the amount produced is set to rise as the nation increases oil output. Iraq, which generates most of its revenue from crude exports, intends to raise output to pay for the refineries, power plants, and other facilities needed to meet domestic demand for the fuel and electricity generation.
The government awarded foreign companies 11 development licenses for crude deposits in two rounds of bidding last year, and it aims to attract investors in three gas areas this year.
Shell, which won contracts last year to develop two Iraqi oilfields, said when announcing the project it aimed to capture about 700 million cubic feet of gas a day in southern Iraq, making use of fuel that’s currently burnt off. Total associated gas production is 1.1 billion cubic feet a day now, with some used and the rest flared, according to the statement.
Southern Iraq’s associated-gas supplies may double within three years as the country boosts oil output, Shell’s Middle East Vice President for new business Mounir Bouaziz said in an interview March 29. Iraq awarded oil-service contracts last year to international companies that pledged to raise output to 12 million barrels a day within the decade. It pumped 2.37 million barrels this month, according to data compiled by Bloomberg.
Shell has pledged to meet domestic gas demand to fire power plants, for example, before exporting the fuel as liquefied natural gas by ship from southern ports.