MANY of the world's biggest energy companies may have to surrender most of the gas from Iraq's vast southern oilfields to a processing and export project led by Shell, a final draft contract between Baghdad and Europe's biggest company shows.
Oil giants including Royal Dutch Shell, BP, United States-based Exxon, China's CNPC, and Italy's Eni signed technical service contracts to develop three oilfields in southern Iraq in 2009-2010.
But the oil deals to develop the Zubair, Rumaila and West Qurna 1 fields near Basra oblige the big oil contractors to surrender the gas they do not use for reinjection or power generation to Iraq's state-run South Gas Co.
Under the US$17-billion gas deal to be ratified by the Iraqi cabinet, Baghdad has pledged to do what it takes to ensure these fields supply the Shell-led Basra Gas Company joint venture with all the raw gas and natural gas liquids (NGL) it needs, including for an LNG export plant.
"SGC shall procure that all raw gas produced from the dedicated fields (other than utilized gas but including all NGL) ... shall, on and from commencement of operations, be dedicated solely to the venture," the contract reads.
"The ministry shall ensure that SGC fulfils its obligation to supply and make available to BGC all committed volumes and planned volumes of raw gas, including by making available deficit volumes as needed," said a letter of confirmation from the energy ministry attached to the contract.
Under the terms of the oil contracts, SGC owns all the gas not used for oil recovery or power generation at the oil fields.
With production from some of the world's largest underdeveloped oilfields expected to surge over the next decade as Iraq boosts capacity to 12 million barrels per day, there is likely to be much more gas than the country needs before long.
The other big oil companies could propose alternatives for using some of it and some are understood to be considering their own gas projects.
But the ministry's confirmation letter attached to the deal said the government will make sure SGC meets its side of the supply deal and ensure that other parties do not prevent it from doing so.
Source:shanghaidaily