Shell-Led Iraq Gas Capture Project Secures Loan

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The Basrah Gas Co. (BGC) has signed a $360 million five-year loan agreement with the International Finance Corp. (IFC) that will help fund the expansion of its project to reduce the flaring of associated gas from oil fields in southern Iraq. BGC -- a joint venture between Royal Dutch Shell, Iraq's South Gas Co. and Japan's Mitsubishi -- currently captures and processes some 60% of the associated gas produced at Iraq's three largest oil fields, Rumaila, West Qurna-1 and Zubair. The 1 billion cubic feet per day of gas captured is enough to generate around 3.4 gigawatts of electricity. The so-called BNGL expansion project consists of two trains that will together add 400 million cubic feet of gas per day of gas processing capacity and enable BGC to reduce greenhouse gas emissions by 10 million tons per year when completed. The total project is expected to cost around $1.2 billion and is now due to be completed in 2023, after delays caused by last year's oil price crash and the forced evacuation of workers because of Covid-19 (WGI Dec.2'20). BGC said $138 million of the loan will come from the IFC's own funds. A further $180 million will come from a loan syndicated to eight international banks -- Bank of China, Citi, Deutsche Bank, Industrial Commercial Bank of China, Natixis, Sumitomo Mitsui Banking Corp., Societe Generale and Standard Chartered. Another $42 million will come from a program that allows institutional investors to participate in IFC's loan portfolio. "This pioneering project has the potential to deliver significant environmental and economic benefits, including lower [greenhouse gas] emissions and increased fiscal revenues, and will improve energy access and lower costs for Iraqi citizens," said IFC's Regional Vice President Sergio Pimenta. Iraq has long ranked second on the World Bank's gas flaring blacklist -- burning some 17.4 billion cubic meters last year -- despite the country relying on Iran for imported gas and suffering regular power cuts. But Baghdad is finally pushing hard to address the problem, with several other initiatives planned or in the pipeline, including a major gas capture project that it hopes to sign with TotalEnergies this year (IOD Jun.21'21). Simon Martelli, London

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