Iraq Energy Roundup

Work completed at Basra power station

The Iraqi Ministry of Industry and Minerals said domestic workers have completed renovations at the al-Najibiya electric station in Basra.

A statement issued by the office of the ministry said foreign contractors would help reconstruct several other stations in the area, but noted the al-Najibiya station was completed entirely by "Iraqi hands," Voices of Iraq reported.

"Ibn Majid General Co., which is owned by the Iraqi Ministry of Industry and Minerals, has finished rehabilitation work on al-Najibiya electricity station, which generates 90 megawatts for the country's national grid," the statement said.

Ministry officials said the company is preparing to take on larger projects in the area, notably at the al-Haritha station, which can bring another 350 megawatts of electricity to the national power grid.

Major refineries in the oil-rich city of Basra can produce around 140,000 barrels per day.

Shell reaches gas deal with Iraq.

The Iraqi government and Royal Dutch Shell signed a deal to capture gas from the oil industry in Basra in a $4 billion contract.

In the first deal with the Iraqi government since the U.S.-led invasion of 2003, Royal Dutch Shell reached agreements to use captured gas from oil activity in Basra.

Around 700 cubic feet of natural gas per day is burned off from oil production as a safety precaution. If captured, that natural gas would be adequate for a majority of the energy needs in the country, The Financial Times reported.

Iraqi Oil Ministry spokesman Assem Jihad said Baghdad wants Shell to develop the capacity to exploit the gas flared in Basra for domestic energy needs as well as exports to regional markets.

"Europe is looking for supplies of gas from Iraq," the spokesman said. "Security used to be a deterrent, but now companies feel that security has improved and this will encourage others to come in."

The deal follows a renewal of a major oil deal brokered by the government of Saddam Hussein and the state-owned China National Petroleum Corp. to develop the al-Ahdab oil field in the eastern Wassit province.

Shell officials will meet with the Iraqi Oil Ministry in Baghdad in October to sign the deal, with Shell taking a 49-percent stake in the venture and the remaining 51 percent going to the Iraqi government.

"We are delighted with the government's decision and look forward to signing the agreement in the near future," Shell said.

Iraq drops Western oil bids

The Iraqi Oil Ministry dropped a measure to award short-term technical contracts to boost oil production to several Western oil majors, officials said.

Assem Jihad, the official spokesman for the Iraqi Oil Ministry, said talks with Western oil majors Chevron, BP, ExxonMobil and Royal Dutch Shell were scrapped because the negotiations over the contracts had gone on for too long, The Washington Post reported.

Jihad noted relations between Baghdad and the oil majors were firm, adding talks may continue in the future.

"We don't have a negative attitude toward any company," he said. "The ministry decided that due to the delay, it was better to cancel this idea."

An official with one of the firms, who spoke with The Post on condition of anonymity, said the cancellation was expected, noting Iraq had started to move away from the deals when they shortened the contract term from two years to one.

Foreign firms eyeing oil ventures in southern Iraq.

Firms from Germany and the United Arab Emirates have expressed interest in developing oil refineries in southern Iraq, local officials said.

Kadhem Ismael, a top commerce official in southern Dhi Qar province, said his Investment Commission received tenders from German firms to build an oil refinery in the region with a capacity of around 150,000 barrels per day, the Iraqi daily newspaper Azzaman reported.

A separate proposal offered through a joint agreement with Iran and the United Arab Emirates is for a larger 350,000 barrel-per-day refinery there.

"We have already agreed to the terms and have allocated a plot of land for the construction of this huge refining complex," Ismael said.

Ismael said the deal includes a price mechanism whereby Iraq will sell the oil to the companies at a price one U.S. dollar below market prices.