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Basra Gas Co. joint venture to cost US$17.2 billion

Gas

Iraqs proposed gas deal with Shell to capture and exploit associated gas from its giant southern oil fields is expected to produce two billion cubic and will cost US$17.2 billion.

According to a new leaked document seen by various news orgnaisations, the joint project is expected to produce two billion cubic feet of gas a day. The summary was submitted for approval to the country's parliament by Iraq's oil ministry .

The deal, signed in July with Shell and Japan's Mitsubishi Corp., creates a joint venture called Basra Gas Co. The two sides disclosed few details about the agreement at the time.

The investment required for the 25-year venture, in which Iraq has 51 per cent, Shell 44 per cent and Mitsubishi 5 per cent, is in fact US$17.2 billion instead of the previously announced US$12 billion, the document said.

It said some US$12.8 billion would be spent on rehabilitation of existing infrastructure and building new ones, while an additional $4.4 billion is required for an liquefied natural gas facility to be built by Shell and Mitsubishi.

Baghdad needs to contribute US$5.236 billion in the venture, some US$1.524 billion of which is existing infrastructure. While Shell and Mitsubishi need to contribute nearly $7 billion, and the remaining money will be financed through the venture's returns, according to the summary.

Shell and Mitsubishi are also offering an optional loan of US$1 billion to the Iraqi side in the venture, the document added.

Iraq estimates it should make around US$31.1 billion over the 25 years of the project from taxes, fees and the raw gas sales to the joint venture, the document said.