Iraq Sends Shell Gas Deal to Cabinet for Approval

Source: Reuters 5/6/2010, Location: Middle East

Iraq's oil ministry has sent the final draft of a gas deal with Royal Dutch Shell to the cabinet for approval, Iraq's oil minister said.

The deal is for a multi-billion-dollar joint venture between Iraq's South Gas Company, Shell and Japan's Mitsubishi in the southern Basra oil hub to capture and use gas burned at the wellhead as a by-product of crude production.

The deal could be signed by the current administration, Oil Minister Hussain al-Shahristani said.

"We made a draft, we sent it to the prime minister to present it to the energy committee of the cabinet," he told reporters in Baghdad.

Shahristani had said previously that a final deal would be left to the new government. Iraq's March 7 national election produced no outright winner and talks to form a new government are expected to take months.

The deal with Shell is to develop gas from the fields of Rumaila, Zubair and West Qurna Phase 1, Shahristani said.

Auction

The oil minister also said that Iraq will invite all 45 international companies, who were prequalified in the two oil auctions last year, to bid to develop three gas fields later this year.

"The companies we will call to compete (in the gas auction) are the same companies that were prequalified in the first and second oil bid rounds, which are 45 companies," he said in a news conference, where he officially opened the country's third international bid round.

The oil ministry will offer data packages to interested companies on June 1, and the auction will take place on September 1, Shahristani said.

The contracts for the gas fields would be service agreements like those given in the oil auctions, he said.

The fields on offer are Akkas in Iraq's western desert, Mansuriyah in eastern Iraq and Siba in the southern oil hub of Basra.

In April, an Iraqi oil official said Royal Dutch Shell, Total and South Korea's KOGAS were favoured because of their experience in the industry.

Two of the fields to be tendered -- the 2.1 trillion cubic feet Akkas field, and Mansuriyah with estimated reserves of 3.3 trillion cubic feet of gas -- were unsuccessfully put on the auction block last June.

The third field -- Siba -- had initially been included in Iraq's second oilfield auction in December but was taken out of the list of reservoirs on offer because the ministry decided it was small enough for Iraq to develop on its own.

Last year, Iraq offered most of its largest oilfields in two oil auctions, awarding contracts with the potential to more than quadruple its crude output to 12 million barrels per day from 2.5 million bpd in six or seven years, making it one of the world's top oil producers.


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