Shell close to awarding contracts for Iraq’s Majnoon oil field

Royal Dutch Shell Plc is reducing the amount of natural gas flared in Iraq and is preparing to award contracts for the country’s Majnoon oilfeld, a senior company executive said.

“Progress is being made,” Mounir Bouaziz, Shell’s Middle East vice president for new business, told the organizer of an Iraqi energy conference to be held in Istanbul later this month. The organizer, Energy Exchange, published an interview with Bouaziz on the conference website.

Shell, which won contracts last year to develop two Iraqi oil fields, now gathers daily 135 million standard cubic feet of natural gas and 500 metric tons of liquefied petroleum gas, or LPG, that had previously been burnt, he said.

“This represents around 20 per cent of the currently flared gas, and over a third of the current Iraqi LPG import requirements,” Bouaziz was quoted as saying.

Iraq, like many other Middle Eastern states, is seeking to develop its gas reserves to use the fuel to fire power plants and reduce carbon emissions. After seven years of conflict and sanctions, the country is trying to restore its capacity for electricity generation to levels achieved before the US-led military invasion of 2003 that ousted the regime of President Saddam Hussein.

Most of Iraq’s associated gas, which is pumped in conjunction with crude oil, is flared, or burnt. Shell plans to eventually capture and sell about 700 million cubic feet of gas a day in southern Iraq. The country flares more than 1 billion cubic feet of gas a day, or 28 million cubic metres.

Iraq, holder of the world’s third-largest oil reserves after Saudi Arabia and Iran, “could develop into a prominent gas industry and match some of the top gas exporters,” he said.

The government approved on June 29 the creation of a Basra Gas Co, a joint venture with Shell, Mitsubishi Corp of Japan and state-run South Gas Co. which will hold 51 per cent.

“We continue working with our Iraqi partners and expect a final agreement soon,” the executive said. “Now we are waiting for the final conclusion and ratification of the contracts by the cabinet.”

Shell and Petroliam Nasional Bhd of Malaysia won a 20-year service contract in 2009 to raise the output of the Majnoon oil field to 1.8 million barrels a day, or four times its current production level.

Shell is now preparing to award contracts for drilling as well as engineering, procurement, construction and management, subject to final approval by Iraqi authorities, Bouaziz said.

The government awarded to foreign companies 11 development licenses for crude deposits in two rounds of bidding last year. It aims to attract investors in three gas areas this year.