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Gas Flaring Deals Could Solve One Of Iraq’s Biggest Problems

  • Iraq flares the second largest quantity of gas in the world
  • Deal with Baker Hughes to capture 200 million standard cubic feet per day from major oilfields
  • Flaring deals could turn Iraq into gas/petrochemical exporter

As a corollary of its new target for oil production of seven million barrels per day (bpd) by 2025, Iraq has repeatedly stated that it is to stop flaring gas by the same point.

As with all statements by Iraq, this commitment should be regarded with scepticism, but any move towards this will allow the country to monetise this burnt off resource and to begin to develop a true gas export business into Asia in the first instance. It will also allow it to use some of these resources in power generation, which would allow it to end its dependence on power and gas imports from neighbouring Iran, a situation which consistently brings pressure on it from the U.S.

As it stands, Iraq flares the second largest quantity of gas in the world (after Russia) – some 17.37 billion cubic metres (Bcm) last year - despite recently joining the United Nations and World Bank ‘Zero Routine Flaring’ initiative aimed at ending this type of routine flaring by 2030. A long-delayed deal ratified last week with the U.S.’s Baker Hughes, and just before that one prong of a four-pronged deal done with TotalEnergies, portend some progress finally in this regard.

The deal with the U.S.’s oil field services giant, Baker Hughes – which was originally supposed to begin at the end of 2018 – will capture 200 million standard cubic feet per day (mmscf/d) of associated gas from the Gharraf and neighbouring ThiQar site, Nassiriya, plus other oil fields north of Basra.

This was to have occurred in parallel with an increase in the fields’ oil output levels, with plans for Gharraf, for example, to see its crude production increase from around 90,000 bpd to its targeted plateau production of 230,000 bpd under the joint auspices of the Japan Petroleum Exploration Company (Japex), Malaysia’s Petronas, and Iraq’s own North Oil. Since the announcement of this joint Japex-Petronas-North Oil development of Gharraf, however, doubts have emerged over the future involvement of the Malaysian firm for one, and therefore, over the likelihood of achieving the different phases of output increases by the agreed times.

For the Baker Hughes gas capture deal, though, according to Iraq’s Oil Ministry, the first stage will involve the advanced modular gas processing solution being deployed at the Integrated Natural Gas Complex in Nassiriya to dehydrate and compress flare gas to generate over 100 mmscf/d of gas. The second stage will involve the Nassiriya plant being expanded to become a complete natural gas liquid (NGL) facility that will recover 200 mmscf/d of dry gas, liquefied gas and condensate.

All of this output is to go to the domestic power generation sector, with Baker Hughes stating that addressing the flared gas from these two fields will allow for the provision of 400 megawatts of power to the Iraqi grid. According to deputy oil minister, Karim Hattab, the project will take 30 months to be implemented.

Related: Oil Prices Near $80 On Tight Global Supply

The fact that this is the second thematically-similar deal to be finally ratified in the last few weeks, despite years of delays to both, may augur well for their chances of success. The other deal, covered throughout its development with various international oil companies by OilPrice.com, will see France’s TotalEnergies’ collect and refine associated natural gas at the five southern Iraq oilfields of West Qurna 2, Majnoon, Tuba, Luhais, and Ratawi. This associated gas project is expected to produce at least 300 mmcf/d of gas and double that after a second phase of development. The agreement between Iraq and TotalEnergies follows the signing of a memorandum of understanding on 27 January to develop various large-scale projects, including associated gas developments in Ratawi in the south, Diyala in the east, and Anbar in the northeast. Total already has ongoing experience of working across Iraq, holding a 22.5 per cent stake in the Halfaya oil field in Missan province in the south and an 18 per cent stake in the Sarsang exploration block in the semi-autonomous region of Kurdistan in the north. 

Successfully capturing associated gas rather than flaring it will also allow Iraq to revive the also long-stalled US$11-billion Nebras petrochemicals project. The original design plans for Nebras – formulated between Shell and the Iraq Oil Ministry and Ministry of Industry and Minerals – were for a project that could produce at least 1.8 million metric tonnes per year (mtpy) of various petrochemicals. This would make it Iraq’s first major petrochemicals project since the early 1990s and one of only four major petchems complexes across the entire country. The others – Khor al-Zubair in the south, Musayeb near Baghdad and the Baiji refinery complex in the north – are operated by Iraq’s State Company for Petrochemical Industries.

From 2012, the development of Iraq’s hydrocarbons chain stalled in the upstream (mainly crude oil) sector, with little impetus on the next stage that is critical for both the petrochemical and refining sectors: a focus on the midstream to attract sufficient capital with the strategic objective of developing an integrated master gas system. However, Shell’s efforts on the US$17 billion 25-year Basra Gas Company (BGC) project in the past three to four years have changed the basic landscape for the future development prospects for Nebras.

Shell has done a good job with the BGC, especially in getting the gas volumes up to over one billion scf/d, meaning that the ethane can be extracted on a sustainable and reliable basis, which allows for sufficient volume for a major petchems plant to be viable. Various sources have said this year that the BGC is planning to increase capacity for gas production to 1.4 billion scf/d within two years and to 2 billion scf/d after that. With a sustained effort to significantly capture and utilise Iraq’s previously wasted associated natural gas, and with Shell still in place on the BGC, if the Nebras project went ahead in a correct linear fashion then it could be completed within five years and would generate estimated profits of up to US$100 billion for Iraq within its 35-year initial contract period.

By Simon Watkins for Oilprice.com


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