Royal Dutch Shell formally signed a joint venture with an Iraq’s state-owned South Oil Company to recapture gas that now goes to waste during oil extraction in the Basra fields. The deal is estimated to be worth $4 billion. Under the agreement, Iraq will control 51% while Shell will hold the remaining 49% of the venture. The gas, estimated at 5 billion cubic feet per day (up from 1 bcfd), will be both for for domestic use and export, said Oil Minister Hussain al-Shahristani.
The deal marks the company’s official return to Iraq after 36 years. Shell, along with the predecessors to BP, ExxonMobil (Standard Oil) and Total (CFP), was among the original partners in the Iraq Petroleum Company before the companies lost their concessions to nationalization in the 1970s. Shell becomes the first Western major to enter Iraq through a deal with Baghdad since then.
Meanwhile, an Iraqi parliamentarian said the country’s recently signed contract with the China National Petroleum Corp to develop the Ahdab oil field cannot be ratified until the former agreement, signed during the rule of Saddam Hussein, is canceled. Ali Hussein Ballo, head of the oil and gas committee at the Iraqi parliament, said Saddam approved the deal with CNPC in 1997. Ballo said from a legal standpoint, the new agreement cannot be signed until the old one is canceled. (AFP, NYT, Sept. 23; Oil & Gas Journal, Sept. 22)