UPI Energy Watch

Iraq and Royal Dutch Shell sign gas deal

The contract, estimated at up to $4 billion, is a next step toward establishing a joint venture between Shell and the South Gas Co.

The joint venture will capture natural gas being flared from oil operations in Basra province.

It is the first major deal between Iraq and a large international oil company since the 2003 invasion. Very few details have been released, aside from a news release from Shell.

Officials from Shell met with Iraqi leaders in Baghdad Monday and signed an agreement to move forward with the deal.

It was first announced following Cabinet approval on Sept. 7. Shell is expected to own 49 percent of the joint venture, with the SGC owning 51 percent.

Iraq flares about 700 million standard cubic feet per day from all of the south oil and gas facilities. The exact amount in Basra is unknown.

IEA says Southeast Asia uses too much gas

According to the Paris-based International Energy Agency, nations in Southeast Asia do not have enough diversity in their fuel mix and rely too much on natural gas. In order to provide a secure, long-term source of energy, leaders must invest in new energy sources, the Bangkok Post reported.

To help, the IEA will hold a conference in Bangkok on the joint development of fuel diversification. The organization hopes to warn policymakers and energy leaders that depending too heavily on one fuel supply source can lead to energy shortages.

"Most fuel reserves here are natural gas, therefore the countries here mostly rely on what they have, but it will run dry very quickly since demand is growing but few new reserves are being discovered," said Twarath Sutabutr, director of policy for Thailand's Energy Ministry.

Natural gas supplies 67 percent of Thailand's power and more than 70 percent of power in Malaysia. Indonesia and Vietnam are also dependent on natural gas for most of their power.

The IEA suggests that leaders in those countries consider adjusting their fuel usage while taking into account production costs, reserves and the long-term carbon dioxide emissions of various fuel sources.

India's RIL drills in Krishna-Godavari

Reliance Industries Ltd. made the discovery in the basin almost two years ago and announced it has finally begun extracting crude oil, Indian newspaper The Statesman reported.

Initial output is 7,000 barrel per day but is projected to increase to 20,000 bpd by over the next 18 to 24 months.

RIL believes when the block reaches peak production, it will be able to provide 40 percent of India's total domestic output, significantly reducing the country's import costs.

The oil and gas production from the well is expected to be $18 billion a year. Natural gas also will be produced, but RIL is prohibited from selling it.

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Closing oil prices, Sept. 22, 3 p.m. London

Brent Crude oil: $93.10

West Texas Intermediate crude oil: $98.46

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(e-mail: energy@upi.com)