TOKYO (Dow Jones)--Mitsubishi Corp. (8058.TO) and Royal Dutch Shell PLC (RDSA) are in talks with Iraq on a natural gas processing plant project in the Middle Eastern country, with Mitsubishi planning a floating liquefied natural gas plant to export part of the feedstock gas, Ahmed Al-Shamma, Deputy Minister for Refining and Gas Processing at Iraq's Ministry of Oil, said Wednesday.
The comment follows Iraq's oil ministry's remarks in December, in which the ministry said it was hoping to sign a $12 billion deal with Royal Dutch Shell and Mitsubishi to capture gas being flared from southern oil fields in order to help boost the country's power generation.
Al-Shamma didn't say whether the planned floating LNG plant was part of the $12 billion deal. The remaining natural gas will be used in the domestic market, he added.
A spokesman for Mitsubishi Corp. said the company was considering producing and exporting LNG from the project, but didn't give details.
Iraq has proven gas reserves estimated at 112.6 trillion cubic feet, the world's 11th-largest, according to the U.S. Central Intelligence Agency's World Factbook.
It produces 1.7 billion cubic feet a day, and some 700 million cubic feet of that supply is flared off into the atmosphere every day.
On the other hand, the Middle Eastern country suffers from an acute power shortage, and hopes to at least double its power production.
It has now only 7,000 megawatts of generating capacity, less than half of its actual power needs.
In December, the Iraqi government said it had invited international specialized firms to build three gas-fired power plants in southern and western Iraq: the 500-MW Najibiyah plant in Basra governorate, a 500-MW Haydariyah plant in Najaf governorate and the 250-MW Akkas facility in the western Anbar province.
Japan's new Minister of Economy, Trade and Industry, Banri Kaieda, said last week METI decided to start providing long-term trade insurance for projects in Iraq through state-owned insurance company Nippon Export and Investment Insurance, aiming to help secure stable energy supply from Iraq to natural resource-poor Japan.
Mitsubishi's natural gas project with Shell will receive the first of the longer-term trade credit insurance, the Nikkei reported earlier this month.