Joint Venture to Invest $17.5 Billion in Iraq Gas and LNG Production

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Japan's Mitsubishi Corporation (TYO:8058) (Tokyo) is entering a joint venture to construct LNG facilities in Iraq to boost natural gas recovery and initiate LNG exports to Japan by 2020.

The joint venture will include Iraq's state-owned South Gas Company, Royal Dutch Shell (NYSE:RDS.A) (The Hague, Netherlands) and Mitsubishi. The latter will have a 5% stake in the project with an estimated investment of $910 million. South Gas and Shell will have 51% and 44%, respectively, reports the Nikkei Shimbun.

In addition to constructing two gas refining plants that are scheduled to begin operations in 2013 with an investment of $4.5 billion, the joint venture plans to invest $13 billion to boost natural gas production and cleaning.

Global LNG exports equivalent to about 5% of Japan's annual LNG imports are expected to be sourced from the project. Mitsubishi's share of product will be supplied to Japanese power and gas utilities that are facing a steep demand for fossil fuels after the reduction in nuclear power supply following the Fukushima Daiichi nuclear power plant disaster. Japan is the world's largest LNG importer and in the current fiscal year will import 80 million tons of LNG from Qatar, Indonesia and Russia to fill the post-disaster power shortage.

Iraq's Ministry of Power reports that the country ranks No. 10 in the world for natural gas reserves, with 112.6 trillion cubic feet.

Mitsubishi will be supported by the Japanese government with trade insurance to cover a portion of the investment. This will be the first time in 21 years that this type of medium- to long-term insurance involving Iraq has been offered. On a visit to Japan, the Iraqi prime minister Nouri Al-Maliki encouraged Japanese companies that were involved in Iraqi construction projects in the 1970s and 1980s to participate in the country's development.

For related information see November 1, 2011, article - Revenue Agreement Finalized for Akkas Gas Project.

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