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$17 billion Shell & Mitsubishi gas flare recovery in Iraq

Shell and Mitsubishi to gather gas from Basra oil fields

The Iraq Government has given its nod to the natural gas exploration deal signed between Shell from the Netherlands and Japan’s Mitsubishi Corporation (Mitsubishi).

The project, which requires capital expenditure of around $17.2 billion, was initially signed in 2008.

The joint venture,  Basra Gas Company (BGC) is state-controlled with shared interests:

 – South Gas Company (SGC) 51%

 – Shell 44%

 – Mitsubishi 5%.

The $17.2 billion capital expenditure gas flare recovery project includes two main packages:

 – $12.8 billion for oil fields upgrading and flared gas gathering

 – $ 3 billion for a Floating LPG plant and Terminal to be moored offshore the Basra coast

The first package will aim to upgrade and modernize infrastructural facilities of the oil fields at a cost of some $12.8 billion , thereby increasing output.

This 25-year deal includes will work closely to capture more than 700 million cf/d of natural gas from three of the most fertile southern acreages namely Rumaila, Zubair and West Qurna Phase 1.

On the second package Shell and Mitsubishi will also set up a liquefied natural gas (LNG) facility, with a maximum capacity of 600 million cf/d  natural gas.

The LNG plant should cost approximately $3 billion capital expenditure and is expected to be completed in 2017.

Under the present scenario, a large volume of  natural gas, estimated at $1.8 billion per annum, is being flared due to the lack of a proper gas processing plant.

Thus, the project will also include condensates and LPG facilities to treat the associated gas.

Shell awarded first orders to GE and ABB

Shell is taking the first measures to implement the project: 

 – Shell issued the first order for a GE turbo generator for the new Khour al-Zubair NGL plant to host a  combined power generation plant.

 – Shell has signed a $63 million  contract with ABB Italy to build up this 50 MW-power plant in Basra in Khour al-Zubair region scheduled for completion in 2013.

 – The rehabilitation of the 18 MW power generator at North Rumaila gas plant.

 – The refurbishment of the K03 compressor, critical for the export of 35 mmscfd at the Khour al-Zubair (KAZ) plant

 – The refurbishment of the propane-cooling compressor at the North Rumaila NGL plant.

 – Review of propane cooling circuit to increase LPG recovery.

 – Repair of condensates pumps (to allow the recovery of condensates that are currently flared).

With this joint venture between South Gas Company, Shell and Mitsubishi , the Iraqi authority targets to boost domestic natural gas production as well as utilize the produce to satisfy the rapidly growing demand for electricity within the country, with any excess amount to be exported.

Volume of additional natural gas is enough to generate 4500 MW (equivalent to 70% of the generating capacity of the current Iraqi).

It can produce 4000 t/y of liquefied natural gas (equivalent to 320,000 cylinder of cooking gas (LNG) per day), and 770 tons per day of condensates (enough to fuel 75,000 cars).

In addition if the natural gas was used, instead of actually flared, to replace fuel oil for power generation in Iraq, that would reduce carbon dioxide emissions by 20 million tons annually.

Shell will extend technological know-how and Project Management Consultancy support to this project.

The company has a long-standing association with Iraq that aims at developing the country’s energy sector.

Local content requirements for the flared gas recovery

The South Gas Company, Shell and Mitsubishi are committed to contributing to the sustainable development of the province of Basrah and Iraq more generally.

The use and development of local companies is key activity by which the Basrah Gas Company venture can contribute meaningfully to local economic development.

Local content for Basrah Gas Company means utilisation of Iraqi manpower, materials and equipment manufactured and assembled in Iraq as well as services.

For all the major contracts, above $2 million awarded by Basrah Gas Company, the contractor will be required to provide the following with respect with local content:

 – Prior experience in working with and developing local companies

 – Prior to commencement of activities a local content plan

 – Periodic reports outlining the use of local content including: manhours, materials, equipment and services following a format that would be agreed between the contractor and Basrah Gas Company.

 After some years standing still, the South Gas Company, Shell and Mitsubishi are moving ahead on the some critical phases of this Basra gas flare recovery project with first orders being placed to GE and ABB. in expecting 2,000 million cf natural gas produced in 2013 and completion in 2017.

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