Deal to help Iraq capture some of the 700m cubic feet of natural gas now flared at its oilfields every day
Legal hurdles have delayed
Iraq's $12bn deal with Royal Dutch Shell and Mitsubishi to
capture flared gas, but agreement on a final draft contract may
be only a few weeks away, a senior Iraqi oil official said.
"I cannot give a timeframe for when we will finish it,"
Deputy oil minister Ahmed Al Shamma said on Monday. "I expect by
the end of next week we will be very close to settling these
issues and reaching agreement on a final draft deal in order to
refer it to the cabinet."
Officials had expected months ago to formalise the Shell
deal, first agreed in 2008.
Shamma said the lack of modern oil and gas laws was standing
in the way of the deal, which would help Iraq capture some of
the 700 million cubic feet of natural gas now flared at its
oilfields every day.
Iraq needs to capture flared gas to fuel electricity
generation. Eight years after the US-led invasion that toppled
Saddam Hussein, Iraqis receive only a few hours of power a day
from the national grid and the shortage has been a key complaint
at recent nationwide protests.
The transfer of ownership of oil and gas facilities to the
joint venture and the export of produced gas are among the major
sticking points, Shamma said.
"The lack of legislation and the current, valid laws are
standing as a hurdle to reaching a final deal with Shell and
Mitsubishi. This is the major issue which has delayed
the Shell gas deal," he said.
Under a deal, Shell would capture associated natural gas at
oilfields near the southern hub of Basra, including Rumaila,
Shamma said current law prevents Iraq from transferring
ownership of facilities to the three-party joint venture and
from exporting gas.
"Now we are discussing a mechanism, and I think it will be
agreed by all parties including Shell, that SOMO (State Oil
Marketing Organisation) will be responsible for exporting the
gas for the benefit of the joint venture," he said.
"But the marketing process - and I mean selecting the
beneficiaries or the buyers - should be done in consensus
between SOMO and the newly established joint venture."
He said a key meeting would be held next week by lawyers
for the parties to "reach an agreement on the final draft deal".
Separately, Abdul Mahdy Al Ameedi, head of the oil
ministry's licensing and contracting office, said he expected
Iraq's cabinet to approve deals for the Siba and Mansuriyah gas
fields this week or next.
Ameedi also told reporters the ministry expected to sign an
initial agreement for the Akkas gas field next month.
Iraq auctioned the three fields last October in its third
bidding round since the 2003 invasion.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.