Shell signs £11bn Iraq deal

Admittedly, when the day's good news comes from Iraq, that's a bit of a worry. But signs are that the war-torn economy is on the way up.

by Emma Haslett
Last Updated: 28 Nov 2011
Now for a bit of good news: Royal Dutch Shell has brokered a $17bn (£11bn) deal with Mitsubishi and the Iraqi government to extract gas from three major oil fields in Basra over the next 25 years. It’s one of the largest deals Iraq has signed with foreign energy firms, but should help the country to meet consumer demand - it’s been beset by power cuts since Sadam Hussein was toppled in 2003. What’s encouraging is that Shell isn’t the only foreign firm to set its sights on the country. In fact, Iraq seems to have become rather fashionable...

The deal will form a new company, South Gas Co, which will be 51% owned by Iraq, 44% owned by Shell and 5% owned by Mitsubishi. It’ll cut down on the amount of gas wasted at the fields: at the moment, 700m cubic feet of gas is burned off per day, because of a lack of infrastructure. Shell was keen to emphasise that while the gas will go directly into the domestic market at the beginning, eventually, it would like to export some of it. Which, considering Iraq has the fifth-largest gas reserves in the Middle East, should begin to ease pressure off energy prices over here.

This all goes to show that, even as the US is pulling the last of its troops out of the troubled country, Iraq’s economy has a huge amount of potential. As a piece in the FT points out, it may still be dodgy safety-wise, but investment bankers are ‘flocking’ over there as the war-ravaged economy gets itself back on track. Apparently, bankers from Morgan Stanley, Goldman Sachs, HSBC, Citigroup and BNP Paribas have all been sniffing around for opportunities.

The first big challenge will be the flotation of its three big phone operations: Zain Iraq, Asiacell and Korek, which the Iraqi authorities have said must take place before the end of August - but could raise more than $3bn. And while many businesses are, understandably, still concerned about the risks involved of moving into Iraq, one is quoted as saying that ‘there are several transactions in the pipeline that look like they’re going forward now’. None of which are likely to be for the faint-hearted but at least it's a start...

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