Shell gets US$4b gas contract with Iraq

ROYAL Dutch Shell will form a gas venture with energy-rich Iraq worth up to US$4 billion, the oil ministry said yesterday of the first Western oil major to do a deal with the central government since the 2003 invasion.

The venture to capture unwanted gas burned off during oil production, for domestic consumption and export, is expected to be signed in Baghdad next month, ministry spokesman Assem Jihad said.

The deal with the Anglo-Dutch company is estimated to be worth between US$3 billion and US$4 billion, the Financial Times newspaper said.

In the past two years, several other energy majors have signed contracts with Iraq's northern Kurdish administration, much to the annoyance of Baghdad.

Oil Minister Hussein al-Shahristani has repeatedly warned the Kurds their contracts would be considered invalid in the absence of a national oil law.

Iraq's cabinet approved the contract, giving state-owned Southern Oil Co 51 per cent and Shell 49 per cent of the venture, to be based in the southern city of Basra.

The project is intended to make use of the 21 million cubic metres of gas that the oil industry burns off for safety reasons, the FT said.

"Europe is looking for supplies of gas from Iraq," Jihad told the paper. "Security used to be a deterrent, but now companies feel that security has improved."

Analysts welcomed the tie-up, saying liquefied natural gas for export could be used to meet booming demand in the fast-growing economies of the Middle East.AFP