Shell to launch tender for Iraqi power plant soon
50MW plant to power oil extraction at Majnoon oil field.
Oil major Shell is close to tendering for the construction of a 50MW power plant in Southern Iraq, according to Mounir Bouaziz, a vice president at the LNG division at Shell.
The plant will be used to power the development and extraction works of the Majnoon oil fields, which is being developed by Shell and Petronas Carigali, and reduce the strain on the country’s electricity supply.
“We are ready to launch the tender for the construction [of the power plant] very soon,” said Bouaziz at the Iraq Future Energy conference held in Istanbul this week. “This is a big part of strategy we have.”
Shell has already acquired the power generation equipment from GE, added Bouaziz.
After extensive clearing works on the former battlefield, Shell and Petronas will start drilling at Majnoon by the end of next year, said Bouaziz. By then, site will host 20 to 30 rigs, and around 1000 wells. After an initial target of 175,000 barrels per day, a contractual plateau of 1.8 million barrels per day. The field now produces 45,000 barrel of oil per day.
Stretching a limited supply
Oil and gas companies currently use 100MW of power from the national grid, estimates Bouaziz, in spite of an acute shortage of electricity in the country.
“We had to look at power generation. Despite the problem of supplying domestic demand, the oil and gas industry are consuming 100MW from the national grid.”
Iraq is struggling to meet rising demand for electricity. Estimates for peak demand in 2009 are between 10,000MW and 13,100MW. Conversely, electricity supply from the national grid averaged at 5,952MW, according to the US Special Inspector report to Congress.
To catch up with increasing demand, the government has set the ambitious targets of growing generation from a nameplate capacity of around 15,500MW to 27,000MW by 2013.
To ensure an adequate supply of feedstock, the government in 2009 has signed a contract with Shell and Mitsubishi for the south gas utilisation project, to capture associated gas from oil production.
Currently, production of associated gas stands at about 1.4-1.5 bcf/d, of which about half is captured, according to IHS Global Insight. This is up from around 400 mmcf/d in mid-2008, but still leaves about 650–700 mmcf/d of associated gas being flared at a time when households rarely receive more than five to seven hours of electricity.
Iraq’s government has ratified the project, allowing the formation of the Basra Gas Company joint venture (JV), in which state-owned South Gas Company will own 51 percent, Shell 44 percent, and Mitsubishi five percent.
A final deal is not far off, says Bouaziz. “There is a decree of the council of ministers approving the joint venture. We are not waiting for the Oil Ministry to work out the final details of a 400 page contract.”
According to Bouaziz, the south fields hold enough gas to produce 30GW of power.