GASTECH 2021: Shell in talks with Iraq to boost BGC's capacity to 2 Bcf/d

Shell is in talks with Iraq over boosting Basra Gas Co.'s processing capacity to 2 Bcf/d in the near future, the country chairman of Shell Group of Companies Iraq & UAE said Sept. 22, as OPEC's second-biggest producer pumps more oil as its quota rises.

Currently BGC is planning to boost its gas capacity to 1.4 Bcf/d from the current 1 Bcf/d over the next two years. It currently captures associated gas from three southern oil fields: Rumaila, West Qurna 1 and Zubair. BGC is a 25-year joint venture grouping state-owned South Gas Co with a 51% stake, Shell with 44% and Mitsubishi Corp. with 5%.

"To get to the 2 Bcf/d is part of the discussion we are having with the government at the moment. Give us another six to 12 months and let's see what happens," Ali al-Janabi told S&P Global Platts on the sidelines of the Gastech 2021 conference and exhibition in Dubai.

"We are undertaking at the moment a kind of a review with the government on this to see where the future gas supplies will come from," he said. "There is currently enough gas capacity to look at an expansion."

Iraq is increasing its production as the OPEC+ alliance continues to ease its historic 9.7 million b/d cut. The 23-member alliance is relaxing production by 400,000 b/d each month between August and December.

Rising quota

Iraq, which has a production capacity estimated at 5 million b/d, is also one of five countries that negotiated at OPEC+'s July 18 meeting a higher baseline for its quota, which will rise from 4.653 million b/d through April 2022 to 4.803 million b/d from May 2022.

Iraq's oil production, including flows from the semi-autonomous Kurdistan region, in August rose 1.9% month on month to 3.961 million b/d, the State Oil Marketing Organization said Sept. 9, even as the country pumped below its August OPEC+ quota of 4.061 million b/d. Iraq's September quota is 4.105 million b/d as the OPEC+ coalition continues to relax production cuts.

"As oil production increases so will the associated gas and that's where the discussions are happening with the government, to look at what the government's intent and strategic vision for upstream suppliers is," said Janabi.

"That's why we have to marry the expectations of the plans on the upstream with the investment from Basra Gas Company."

Shell is also continuing negotiations with Iraq over the 1.5 million mt/year Nebras ethane cracker. Shell and Iraq signed a detailed heads of agreement on the project in 2015.

"We need to get to the next level of strategic intent from the government," Janabi said. "So you need to marry up the supply side of the ethane with when you take that investment decision as well."

Shell has revised down the cost of the project, Janabi said, without disclosing the new figure. The project cost was previously estimated at $8 billion.