An agreement with Anglo-Dutch Shell and Japan's Mitsubishi on a joint
venture to capture, treat and utilize flared associated gas in southern Iraq
will be approved by the Council of Ministers by the end of the year, the top
Iraqi adviser on the project said Wednesday.
The joint venture agreement, in which Shell holds a 44% stake, Mitsubishi
5% and Iraq's South Gas Co. the remaining 51%, was drafted in 2008 but has run
into political and technical problems.
According to the Heads of Agreement signed in late 2008, it was to be
finalized early this year.
Asri Mousa, a top adviser to the oil ministry, said some legal phrases
needed to be agreed before the draft could be resubmitted to the cabinet,
which has given preliminary approval already.
"When we get this approval, the company can work on the ground starting
next year," he told Platts on the sideline of the CWC Iraq Mega Projects
conference in Istanbul.
Opposition has come from some members of parliament and others who object
to the deal because it was agreed through direct bilateral negotiations with
Shell initially -- Mitsubishi joined later -- without an international
tendering process and for not including local authorities in the negotiations.
Earlier this week, the party of former Prime Minister Ayad Allawi, who is
a contender for the job following an inconclusive general election in March,
issued a statement that all long-term deals with foreign companies would be
invalid and reviewed when the next government is in place.
Under the 20-year agreement, the joint venture would gather gas that is
otherwise flared for supply to local power stations in southern Iraq with the
possibility of exports some time in the future once demand is met either by
pipeline or as LNG.
The oil ministry has been criticized for not moving quickly enough with
implementation of the agreement.
"Nothing has been delayed by the minister, [it has] nothing to do with
politics," said Mousa. "It is pure negotiations. Everyone wants to get the
best for their side."
He added: "We want to make sure that in the future, there are no
He said that political complaints have died down because the gas,
currently being wasted, will meet electricity and other local demand.
Associated gas projects are more complex than dry gas or oil projects,
Iraq, which has been rebuilding its energy infrastructure after decades
of war and sanctions, does not have the ability to process or store the
associated gas it produces. This has led to severe power shortages in several
parts of the country and sparked demonstrations in a number of Iraqi cities
during the sweltering summer months, when demand for air conditioning is high.
--Ben Lando, email@example.com
Similar stories appear in International Gas Report
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