Kurdistan opens gas field

The Crescent and Dana effort will ease electricity shortage once production of 75 million cubic feet a day begins.

Gas flares like this one in Iraq will instead be used to generate electricity.
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The Sharjah energy affiliates, Crescent Petroleum and Dana Gas, have begun producing gas in Iraq's autonomous Kurdistan province in a development that will help ease the region's severe electricity shortage. The companies said yesterday they had started pumping 75 million cubic feet a day (cfd) of gas and expected to quadruple that in stages to 300 million cfd within the first half of next year. They said the gas would be piped to a pair of new power plants under construction by a Jordanian contractor near Erbil and Sulaimaniya, the two largest cities in Kurdistan.

The fast-tracked gas production, processing and transportation project, completed just 15 months after it was announced, is urgently needed. No new power plants have been built in the northern Iraqi province in the past 50 years. The mountainous region, whose inhabitants receive at most a few hours of electricity daily, currently relies on hydroelectricity from projects installed before the former Iraqi dictator, Saddam Hussein, seized power in a 1968 coup. This supply is supplemented by generators burning diesel.

During the Saddam era, Kurdistan's infrastructure needs were neglected as part of an Iraqi government campaign against Kurdish groups seeking independence. "This is the first project of its kind in Iraq, and it will provide important economic and social benefits for the Kurdistan region and all of Iraq," said Majid Jafar, the executive director of Crescent. "We aim to now build on these achievements ... with our strategic focus on maximising economic benefit and addressing local needs."

In addition to developing a gas field, Dana and Crescent installed a 180-kilometre pipeline across challenging mountainous terrain that sometimes required clearing minefields. They also installed gas-processing facilities, which the companies said they would expand to handle extra gas volumes as the power plants became fully operational. When completed, the two new power plants will have combined generating capacity of 1,250 megawatts, sufficient if fully utilised to power about 1.8 million homes or several large industrial projects.

The more than 50,000 tonnes of equipment for the project, comprising about 2,300 lorry loads, included pipe material from China and Thailand, and a modern, prefabricated gas-processing plant from the US that had to be airlifted into Iraq. Dana and Crescent said they used local private companies with Turkish partners as contractors in order to stimulate development of local expertise. The companies said they were holding talks with the Kurdistan Regional Government (KRG) to develop a master plan for regional gas development and utilisation. They soon hope to inaugurate "Kurdistan Gas City", an industrial complex featuring gas-related industries.

Crescent, a private oil and gas producer, is the largest shareholder of Dana, a publicly held gas company with shares listed on the Abu Dhabi Securities Exchange. The start of the companies' Iraqi gas project closely follows an agreement last month between Iraq's state-owned South Gas Company and the British energy major, Royal Dutch Shell, to capture, process and market up to 700 million cfd of gas produced with oil in the country's southeastern province of Basra. Without transportation infrastructure and market access, that gas is now being burnt as waste. However, the South Gas/Shell joint venture is not expected to start work on the project for at least a year.

In the meantime, Iraq's Ministry of Oil is expected to announce a bidding round next year for pre-qualified companies seeking entry to the country's oil sector. Iraq's federal government and the KRG have been locked in a dispute over oil development, with Baghdad increasingly favouring state control of the sector while the KRG believes it should be privatised. As a result, the Iraqi government has declined to recognise more than 20 deals that the KRG has signed with foreign energy companies for oil exploration and development in Kurdistan, and has blocked exports from such projects.

Foreign participation in development of the country's gas resources, however, has proved less politically contentious, and Baghdad has not raised objections to the Crescent/Dana project. One of that project's key features, adopted in part to avoid problems with Baghdad, is that Crescent and Dana will provide gas free to Kurdistani power plants. They plan to make money by extracting and selling valuable natural gas liquids from the gas stream.