Iraq & Shell to Sign $12 Bln Gas Deal

Iraq will sign a final contract with Royal Dutch Shell for a $12-billion project to capture flared gas at southern oil fields, two sources close to the deal said on Sunday.

Iraq's oil ministry, Shell, and Japanese project partner Mitsubishi have solved differences that had delayed the joint venture with Iraq's South Gas Co. since a draft agreement was struck in 2008. "We have agreed on everything. The initial signing is on Tuesday," said an Iraqi oil source.

The final version of the contract, which has been held up by legal problems and political disagreement, will be sent to the cabinet for approval after it is initialled this week, another source close to the deal said.

The joint venture, named Basra Gas Co, would be at the forefront of Iraq's plans to modernise its energy facilities and boost oil exports that hover around levels seen before the U.S.-led invasion in 2003. The Iraqi government will hold 51 percent of the venture. Iraq has struggled for years with power blackouts and risks years of electricity shortages until associated gas from vast oil fields in the south is captured and fed to new power plants.

Iraq is losing 1 billion cubic feet per day of gas through flaring, mostly from the south. Iraq would use the gas produced under the agreement with Shell in the domestic market to help meet rapidly rising demand for electricity and could export the surplus.