Shell, Mitsubishi Will Start Iraq Plant on April 15

Royal Dutch Shell Plc (RDSA) and Mitsubishi Corp. (8058) will start capturing gas from Iraq’s oil fields next week in a $17 billion project known as Basra Gas Co.

“Basra Gas Co. will start operations officially on April 15,” said Ali Hussain Khudayir, director general of South Gas Co., which represents the Iraqi government’s controlling stake in the Basra Gas Co. venture.

The plant will produce 400 million cubic feet (11 million cubic meters) a day from next week, climbing to 2 billion cubic feet a day by 2017, Khudayir said on March 27. The facility will capture so-called associated gas from the Zubair, Majnoon and West Qurna-1 oil fields in southern Iraq.

Iraq’s government holds a 51 percent stake in the Basra Gas venture, while Shell owns 44 percent and Mitsubishi the remainder. Iraq signed a 25-year agreement with Shell, Europe’s largest oil company, and Mitsubishi in Nov. 2011 to capture gas from some of the biggest oil fields in the south. The holder of the world’s fifth-largest oil reserves burns off as much as 1 billion cubic feet a day of gas because it lacks the facilities to capture byproducts of crude production, Deputy Industry Minister Mohammed Zain said in October.

Iraq has sought investors to increase gas output to end power outages and supply electricity stations, which suffered from decades of war and economic sanctions. The country’s electricity grid remains unable to meet domestic demand 10 years after the U.S.-led invasion that toppled Saddam Hussein. The government plans to export gas after it has satisfied domestic demand.

To contact the reporters on this story: Khalid Al-Ansary in Baghdad at kalansary@bloomberg.net; Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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