Iraq Sends Draft of Shell Gas Deal to Cabinet for Approval

(Dow Jones Newswires), May 6, 2010

The Iraqi Oil Ministry has sent the final draft of a gas deal with Royal Dutch Shell to the cabinet for approval, Iraq's Oil Minister Hussain al-Shahristani said Thursday.

The proposed $10 billion-$20 billion joint venture between Shell, Iraq's South Gas Co. and Mitsubishi Corp. (8058.TO) aims to capture a huge amount of gas from oil fields in Basra that is currently being wasted.

Shahristani told reporters in Baghdad that the outgoing cabinet of Prime Minister Nouri al-Maliki could sign the deal. Iraq held parliamentary elections March 7 and a new cabinet is expected to be installed within the next few weeks.

"We made a draft, we sent it to the prime minister to present it to the energy committee of the cabinet for consultation with experts," he said, adding, "Whenever it is approved by the cabinet, it will be signed."

In March, the two sides failed to finalize the deal and agreed to a six-month extension.

Last month, a senior Iraqi oil official said that the Shell gas-development project was in trouble. He said one of the major obstacles hindering the signing of the deal was Iraq's inability to finance the project. A Shell official, however, said at the time that a solution had been found, although he didn't elaborate.

The second problem was that many senior officials in the Iraqi government opposed the deal, arguing that Shell and its partner didn't have to compete with other international companies. The Oil Ministry insisted other international firms were invited to compete.

According to the preliminary agreement signed in September 2008, Iraq's South Gas Co. will control 51% of the project, while Shell will hold 44%, and the remaining 5% will be owned by Mitsubishi.

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