Shell, Iraq Seal $4 Billion Gas Deal

The Iraqi government will hold 51% and Shell the balance

Royal Dutch Shell has formally signed a gas joint venture with an Iraqi state-owned company estimated to be worth $4 billion, a top government oil official said on Sept. 23. The company becomes the first Western company to enter Iraq through a deal with Baghdad after nearly four decades.

The venture, in which the Iraqi government will hold 51% and Shell the balance, will extract gas from oilfields in the southern city of Basra. Last week, Oil Minister Hussein al-Shahristani said Iraq's stake in the venture would be the facilities and equipment already in place and that a cash injection would come from Shell. "These (existing facilities and services) will be valued by an independent third party," Shahristani said.

The venture will pay international market prices for the 706 million cubic feet of gas it captures daily from the Basra oilfields, he said. It will process the gas and supply it in local markets to industrial companies like fertilizer and petrochemical plants as well as export it, Shahristani said.

Former dictator Saddam Hussein threw out foreign oil companies after he nationalized the sector in 1972. Since Saddam's execution in 2006, a number of foreign majors have signed contracts with the country's northern Kurdish government, but none with the central government until now.

Copyright Agence France-Presse, 2008

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