Shell Starts World’s Largest Gas-Capturing Plant in Iraq

Royal Dutch Shell Plc. (RDSA) and Mitsubishi Corp. (8058) started operations at a $17-billion joint venture to capture gas from some of Iraq’s largest oil fields.

The Basrah Gas Co. project, the biggest of its kind, captures so-called associated gas flared from the southern oil fields of Rumaila, West Qurna-1 and Zubair, according to a statement on Shell’s website. Iraq’s state-owned South Gas Co. holds a 51 percent stake in the 25-year venture, while Shell owns 44 percent and Mitsubishi the remainder.

“Basrah produces only around 1 billion cubic feet a day of associated gas and some 700 million cubic feet are being flared, which is wasting millions of dollars of the country’s resources,” Ali Khudair, director general of South Gas, said in the statement. The project will help eliminate flaring and provide fuel to industries, power generation as well as income to the state, he said.

Iraq, which holds the world’s fifth-largest oil reserves, sought foreign 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 power 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.

Basrah Gas will upgrade current facilities and build new assets to increase production capacity to 2 billion cubic feet a day from 400 million cubic feet a day, Shell said in the statement. “A number of critical projects have already started, like the new power plant at the Khor Al Zubair gas plant, compressor stations in North Rumaila, as well as leasing compressors to reduce gas flaring in the Zubair field.”

The project, the largest gas project in Iraq’s history, also includes the option to build a liquefied gas plant for potential export once domestic energy needs are met, according to the statement.

To contact the reporters on this story: Kadhim Ajrash in Baghdad at kajrash@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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