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Iraq Contract May Force Oil Majors To Cede Gas To Shell

Iraq Contract May Force Oil Majors To Cede Gas To Shell
Reuters
Δευ, 29 Αυγούστου 2011 - 18:50
Oil companies including BP PLC (BP), Exxon Mobil Corp. (XOM), Eni SpA (E) and China National Petroleum Corp. could have to surrender most of the gas they extract from Iraq's southern fields to a project led by Royal Dutch Shell PLC (RDSA), Reuters reported Monday, citing a "final draft contract" between the Iraqi government and the U.K. giant.
Oil companies including BP PLC (BP), Exxon Mobil Corp. (XOM), Eni SpA (E) and China National Petroleum Corp. could have to surrender most of the gas they extract from Iraq 's southern fields to a project led by Royal Dutch Shell PLC (RDSA), Reuters reported Monday, citing a "final draft contract" between the Iraqi government and the U.K. giant.

The other companies signed service contracts to develop three fields in southern Iraq -- Zubair, Rumaila and West Qurna 1 -- but the agreements require them to cede any gas they don't use for reinjection or power generation to Iraq's state-run South Gas Co.

Under a $17 billion deal to be ratified by Iraq's cabinet, Baghdad has pledged to do what it takes to ensure the three fields supply the Shell-led Basra Gas Co. joint venture with all the raw gas and liquefied natural gas it needs, including for an LNG export plant, according to the contract, a copy of which Reuters reported seeing. Terms of the oil companies' service contracts specify that SGC owns all gas not used for oil recovery or power generation at the fields.

The other oil companies could propose alternatives for using some of it and some are understood to be considering their own gas projects. But a letter Iraq 's Oil Ministry attached to the deal said the government will ensure SGC meets its side of the supply deal and that other parties don't prevent it from doing so.

The quantities of raw unprocessed gas SGC will deliver to the Shell-led joint venture, backed by minority partner Japan 's Mitsubishi Corp. (8058.TO), aren't noted in the draft contract and will be revised in line with output from the oil fields.

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