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Iraq looks to Kuwait gas pipeline to pay off reparations

Iraq under pressure from World Bank to cut gas flaring

Gulf News

Dubai, Tokyo, London

Iraq has hired Japan’s Toyo Engineering to help build a gas pipeline to Kuwait and a related petrochemical plant as Baghdad looks to reduce flaring and finish paying reparations owed for its 1990 invasion of its neighbour.

The project, details of which have not been reported before, would allow Kuwait to diversify its gas imports.

It would also deal a blow to Royal Dutch Shell, which aimed to be the dominant gas player in Iraq before relations with Baghdad soured following Shell’s exit from large oil projects.

“Iraq needs to urgently reduce gas flaring as it trails behind all targets it has promised the World Bank,” said a senior industry source working on the project but not allowed to discuss it publicly.

“The Kuwaiti gas project is a quick fix and an easy way to monetise gas resources.” The World Bank, which has repeatedly made reducing gas flaring a condition of lending to Baghdad, did not respond to a request for immediate comment.

Toyo is proposing to construct a gas pipeline and start deliveries after 2019, industry sources said.

Toyo’s chief financial officer, Kensuke Waki, told Reuters that talks about a pipeline and a petrochemical plant were ongoing but a final investment decision had not yet been made.

Kuwait is very keen on the project and has offered a sovereign guarantee for up to 80 per cent of the costs, industry sources said. No total cost has been announced.

Kuwait’s oil ministry did not respond to a request for immediate comment. Oil minister Issam Al-Marzouq said last month that talks between Kuwait and Iraq were focused on a proposal to use gas to help pay Baghdad’s final $4.6 billion in war compensation payments.

Iraqi oil ministry spokesman Asim Jihad said talks were focusing on price and confirmed that supplies could be used to help pay off reparations.