Basrah Gas Company, the joint venture between Anglo-Dutch major Shell and the Iraqi government, signed an agreement with a Chinese state-backed contractor to build a natural gas liquids plant.
China Petroleum Engineering & Construction Company will work to increase capacity by 40 per cent by adding a 400 million standard cubic feet per day greenfield gas processing plant equipped with two trains, with 200 million cf/d capacity each.
CPECC would be responsible for "all the construction, installation and the site works for the plant", Basrah Gas Company managing director Frits Klap said in a statement posted on Chinese state agency Xinhua.
Iraq, Opec’s second-biggest oil producer, has a gas output of around 1 billion cf/d, of which nearly three-fourths are flared, due to inadequate infrastructure to process the by-product gas from the southern fields.
Baghdad has been approaching energy majors and service companies to reduce the gas flaring, which has cost its economy billions in lost revenue. Gas flared could instead be used to meet domestic power generation needs, or for export.
An estimate by German industrial company Siemens, which is engaged in the Iraqi power sector, stated the country could save around $5.2 billion over the next four years by reducing gas flared from its fields.
The planned NGL facility will be built in the Ar-Ratawi area, west of Basrah, and is scheduled for completion by the end of 2020. Apart from reducing gas flaring, the project will increase the supply of dry gas and increase export capacity.
The contract to CPECC follows a decision earlier this month by Shell Iraq to increase capacity by 40 per cent with the consensus of other partners in its JV –Iraq's South Gas Company, Shell and Japan's Mitsubishi.
The programme will process gas flared from the southern fields of Rumaila, West Qurna 1 and Zubair, to dry gas for power generation as well as into liquids for domestic use and export.