Many of the World's biggest Oil companies may have to surrender most of the Nat Gas from Iraq's vast southern Oilfields to a processing and export project led by Shell, a final draft contract between Baghdad and Europe's biggest company.

Oil Giants including Royal Dutch Shell (NYSE:RDS-A), BP (NYSE:BP), U.S.-based Exxon (NYSE:XOM), China's CNPC, and Italy's Eni (MI:ENI) signed technical service contracts to develop 3 oilfields in Southern Iraq in 2009-2010.

But the Oil deals to develop the Zubair, Rumaila and West Qurna 1 fields near Basra oblige the Big Oil contractors to surrender the Nat Gas they do not use for re-injection or power generation to Iraq's state-run South Gas Co (SGC).

Under the US$17-B Nat Gas deal to be ratified by the Iraqi cabinet, Baghdad has pledged to do what it takes to ensure these fields supply the Shell-led Basra Gas Company (BGC) Joint Venture with all the raw Nat Gas and Nat Gas liquids (LNG) it needs, including for an LNG export plant.

SGC shall procure that all raw Nat Gas produced from the dedicated fields, other than utilized Nat Gas but including all NGLs, shall, on and from commencement of operations, be dedicated solely to the venture, the contract reads.

The Ministry shall ensure that SGC fulfils its obligation to supply and make available to BGC all committed volumes and planned volumes of raw gas, including by making available deficit volumes as needed, said a letter of confirmation from the energy ministry attached to the contract.

Under the terms of the oil contracts, SGC owns all the Nat Gas not used for Crude Oil recovery or power generation at the Oil fields.

With production from some of the World's largest underdeveloped Oilfields expected to rise over the next decade as Iraq boosts capacity toward 12-M BPD, there is likely to be much more Nat Gas than the Country needs before long.

The other Big Oil companies could propose alternatives for using some of it and some are understood to be considering their own Nat Gas projects.

But the Oil ministry's confirmation letter attached to the deal said the government will make sure SGC meets its side of the supply deal and ensure that other parties do not prevent it from doing so, including not permitting any other entity to do a specified thing.

Shell declined to comment.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.