Shell Close To Completing $12B Iraq Gas Deal

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Royal Dutch Shell, Europe's largest oil company, could finally ink a long awaited $12 billion natural gas deal with the Iraqi government. The country's oil ministry said the deal could be signed as soon as Tuesday.

Shell (RDS-A) originally signed an agreement to begin talks on the project in 2008. The Anglo-Dutch oil giant and its partners are expected to tap into the Rumaila, Zubair and West Qurna Phase 1 fields in the oil-rich southern part of Iraq. Shell's partners on the project include South Gas Co. and Japan's Mitsubishi.

Iraq's government will own 51% of the joint venture known as Basra Gas Co. Iraq is losing 1 billion cubic feet per day of gas through flaring, mostly from the south. Iraq would use the gas produced under the agreement with Shell in the domestic market to help meet rapidly rising demand for electricity and could export the surplus, according to Indian press reports.

The deal with Shell is expected to help Iraq add 700 million cubic feet per day to its natural gas production. Shell may set up a 600 million cubic feet per day liquefied natural gas project in Iraq at a later date.

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