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Prior to the 2003 regime change no private sector gas projects had been implemented in Iraq and gas prices were heavily subsidized, both nationally and in a regional context**.
However, since 2007, two major gas projects have been signed, the first in Kurdistan by the Ministry of Natural Resources (MNR) and the second in Basra province by the Ministry of Oil (MoO). In addition the MoO has signed service contracts for three gas fields.
Each of these projects has been structured under different commercial terms, resulting in different gas price mechanisms.
However, the Iraqi government has contracted Booz & Company to develop the Iraq National Energy Strategy (INES), the executive summary of which was recently published in MEES (14 and 21 June). INES contains recommendations on gas pricing.
Furthermore, the World Bank is working on another pricing mechanism for associated gas in Iraq. The details of these proposals to establish a unified federal framework for gas pricing are yet to be made available. Moreover, much will depend on the locality of these projects and the fiscal regime adopted. The following is a brief outline of the shareholding of gas development projects in Iraq which will influence gas pricing policy for domestic consumption and exports:
1. Kurdistan region development of Khor Mor and Chemchemal gas fields***
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•Service contract signed with the MNR (direct negotiation).
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•Shareholders: 80% Dana Gas and Crescent Petroleum (JV), 10% MOL and 10% OMV.
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•Current gas production 340mn cfd of feed gas for power generation.
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· •Current liquid production 15,000 b/d of condensate.
2. Basra Gas Company (BGC) gathering and development of associated gas**** from Rumaila, Zubair, West Qurna and possibly Majnoon fields.
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Service contract signed with the MoO (direct negotiation).
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Shareholders: 51% South Gas Company, 44% Shell and 5% Mitsubishi.
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Current gas production 350-400mn cfd (feed gas).
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Potential production of 2-4bn cfd.
3. Iranian gas supply to Iraq by pipeline^ for electricity generation.
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Agreement between the Iraqi Ministry of Electricity (MoE) and the Iranian MoO
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Iran to supply Iraq with approximately 850mn cfd of dry gas.
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Gas sales agreement based on international market.
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A 56-inch pipeline from Iran to Iraqi midland provinces estimated to cost $365mn.
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Pipeline could be extended to Syria and Lebanon.
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