Basrah Gas Company (BGC) and International Finance Corporation (IFC) announced the signing of US$360 million, five-year loan agreement, that aligns with the Government of Iraq’s vision to maximise utilisation of its natural gas resources and increase access to energy for Iraqi homes and businesses.
Through this agreement, IFC is investing in BGC to expand one of the largest gas flaring reduction projects in the world, to support a more resilient, sustainable energy sector in Iraq. BGC is an Iraqi midstream natural gas joint venture created to treat and process associated gas – a by-product of oil production in the region – that would otherwise be flared.
The expansion will contribute to increasing BGC’s capacity to process an additional 400 mmscf/d of natural gas from nearby producers. This is an increase of 40% of BGC’s current capacity, thereby helping the country meet its growing energy needs and powering an additional one million Iraqi homes. The BNGL project will increase BGC’s ability to reduce greenhouse gas emissions by around 10 million tons per annum.
Iraq is endowed with significant reserves of natural gas. However, in the absence of adequate infrastructure to process it during oil production, the gas is flared. This leads to significant GHG emissions. Simultaneously homes and businesses in the country rely on other energy sources which may themselves have associated GHG emissions. By capturing the gas byproduct for subsequent use by these customers, the project can help Iraq reduce overall emissions. IFC’s loan will partially fund the construction of a new gas processing plant, Basrah Natural Gas Liquid Extraction Plant (BNGL), part of a broader expansion plan to reduce gas flaring in southern Iraq.
“Signing the loan agreement reinforces the collective efforts to increase investment in associated gas flaring reduction using world-class technologies. It is in line with our objectives of turning flared gas into cleaner valuable energy and reducing the impact of the Green House Gas emissions on the environment,” said Ihsan Abdul Jabbar Ismail, Minister of Oil for Iraq. “This loan opens new horizons for cooperation and collaboration that serve common purposes and interests, reiterating Iraq’s commitment to increasing investment in associated gas flaring reduction and to achieving the objectives set by the Paris Agreement.”
“We are delighted to have signed this agreement with IFC, the first loan facility of its kind in the oil and gas sector – a significant milestone to be proud of”, said Malcolm Mayes, BGC Managing Director. “The agreement demonstrates the strength of Iraqi companies, such as BGC, and their ability to attract funding and trust from international banks. The intent of this five-year loan is to support BGC’s growth project (BNGL) and turn the otherwise wasted flared gas into much needed energy for the country. Our strategy is in alignment with the Government of Iraq’s vision to power Iraqi homes with electricity and create a more sustainable energy industry. This deal wouldn’t have been achieved without the continuous support of Ministry of Oil and IFC as well as our shareholders.”
“This pioneering project has the potential to deliver significant environmental and economic benefits, including lower GHG emissions and increased fiscal revenues, and will improve energy access and lower costs for Iraqi citizens,” said Sérgio Pimenta, IFC Vice President for the Middle East and Africa. “The project comes after years of hard work and strong cooperation by all parties involved. We hope that it will send a strong signal to other investors and help drive more private investments to tackle climate change and support inclusive growth in Iraq.”
IFC’s investment comprises of $137.76 million loan from IFC’s own account, a $180 million loan syndicated to eight international banks (Bank of China, Citi, Deutsche Bank AG, Industrial Commercial Bank of China, Natixis, Sumitomo Mitsui Banking Corporation, Société Générale and Standard Chartered Bank), and a $42.24 million loan through IFC’s Managed Co-Lending Portfolio Program, a platform that allows institutional investors to participate in IFC’s loan portfolio.
The project benefits from long-standing engagements of the World Bank Group in Iraq’s energy sector. Iraq joined the Global Gas Flaring Reduction initiative in 2011 and committed in 2013 to eliminate all routine natural gas flaring by 2030.