From utilisation to monetisation

Iraq

Iraq is balancing its immediate natural gas needs for additional power generation capacity with finding the most effective ways to monetise gas in the long term. Ali Vezvaei, regional president of German technology engineering, procurement and construction company Linde Engineering, discusses the country’s approach to move from domestic gas utilisation to monetisation.

Gas will become more important for Iraq over the next few years. It is one of the low-hanging fruits in the country, simply as most of it is currently being flared. Gas was burned at a rate of 20 mcm (706 mcf) per day in 2014, according to Shell figures.
The oil major is already tackling this as a pioneer and key stakeholder in the multi-billion-dollar Basrah Gas Company venture, which is aimed to capture flare gas.
As the country’s gas starts becoming available over the next years, two questions arise: how to monetise the gas, and how to find ways to cover the immediate need for gas by the country’s increasing power demand?
Companies will also have to decide on the value chain whether to build a petrochemicals facility or a power plant, or both.

ISLANDS OF OPERATION: Distributed generation might potentially cover the power deficit during the build-up of gas distribution infrastructure and the renovation and expansion of the existing distribution network – likely to begin in late 2016 – depending on how the overall security situation evolves.
These are small islands of power generation, fed through distributed gas systems that are intended to serve communities with limited power needs.
Eliminating power shortages would allow companies to function more efficiently and encourage the industrial sector to make longer-term plans. This would improve local employment and in turn stability. The rental power business – where they sell power – may soon be an interesting piece in Iraq’s energy matrix. Generators can also cover the country’s energy needs area by area, until the grid is expanded.
Iraq cannot afford the power outages it currently struggles with and importing gas from neighbouring countries is another alternative that seems to be looked at as a short-term bridge, while Shell’s gas venture is going to be a sustainable and long-term answer to the challenge.

SWEET TASTE: The creation of a gas value chain is the real opportunity for Iraq. Shell’s planned petrochemicals complex near Basra, scheduled to come on line in few years, will create a value chain that marks the dawn of a new era for Iraq’s gas-based industry.
Once Iraq enters the petrochemicals sector, it will enjoy the sweet taste of sustainable and diversified revenue alongside the gravity of job creation, because the two are essential elements of a safer today and a better tomorrow for the country.

ANOTHER AVENUE: The industrial gases business, from production to consumers, is another value chain that is not only an enabler to other downstream industries but also an important source to create both job opportunities and avenues for extended distribution, which have been long awaited in Iraq.
Industrial gases have a wide range of application from welding and downstream processes all the way to food and beverage and healthcare sectors.
When Iraq’s downstream and petrochemicals sector take off and projects such as the one Shell has envisioned break ground, a reliable, economic and continuous supply of industrial gases is going to be key.
Countries such as the UAE and Saudi Arabia have gone down this path already, so the roadmap to a successful industrial gases scheme is clear. Fortunately, the units to manufacture industrial gases have advanced and today are also available in the standardised plug-and-play type, so they can be an enabler for any phase of a project’s development, be it from welding all the way to downstream operations.
This also means that a reliable supply stream should be forthcoming as early as 2017-2018, linking with the downstream and petrochemicals sector timeframe of 2018-2019, albeit depending on the success of the upstream gas operations.

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