CHALLENGES AND SOLUTIONS OF REDUCING GAS FLARING IN IRAQ

Regional Forum on Gas Flaring and Associated Gas Utilisation Muscat, May 10th -11th 2010

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Mounir Bouaziz Vice President Commercial, New Business, LNG Middle East and North Africa Royal Dutch Shell Plc
May 2010 1

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May 2010

1.0
Gas Flaring in Iraq

May 2010

Iraqs Gas Sector Fundamentals

70% of proven gas is associated gas Supply highly dependent on oil production Non-Associated Gas >15 tcf* Limited gas infrastructure between regions (South Iraq holds 70% of gas) Usable power capacity of ~5,000 MW*

Iraq needs in excess of 10,000 MW*

* Source: Energy Information Administration, Ministry of Electricity

May 2010

Current Status of Flaring in Iraq

Substantial volumes of Associated Gas is flared in Basrah Province Of the ~1100 mmscf/day produced, greater than 700 mmscfe/day of gas flare

This is equivalent to 560 mmscf/day of dry gas *, sufficient to generate

4500 MW * (the current operational power generation is 5000 MW)

4000 t per day of LPG * (equivalent to 320,000 LPG cylinders per day) 770 tons per day of Condensates * The current gas flare is releasing ~ 14 mtpa of CO2 per year *

Significant shortage in dry gas to fuel power plants Significant shortage in LPG production forcing import of LPG Loss of opportunity revenue from export of surplus LPG or dry gas

*Source: Shell estimates

May 2010

Flaring Will Increase Across All Licensing Round Fields

5,000
Gas Production from licensing rounds (6 MMbbl/d scenario)

4,500
Million standard cubi feet per day

4,000

Gas flared

3,500

3,000 2,500
2,000 1,500
Current operational Gas processing capacity

1,000
500 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

*Source: Shell estimates based on current oil and products prices. A 4 bcf/day gas flare assumes no action is taken over the next 3 years
May 2010 6

Southern Iraq Gas Supply/Demand Scenario (LR data)

[bcf/day] 7.00

Domestic Demand for South Iraq Gas

6.00

NAG & YTF Potential*

Oil Production > 9 mbpd *

LR1 + LR2 majors' bids

5.00

4.00

~4 bcf/day *

Significant Surplus Gas

3.00

2.00

Gas demand Curve assumes:

1.00

10% annual growth in Power & Industry The needed incremental Gas Gathering & Processing Capacity in place
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

0.00 2009

*Source: Shell estimates of gas production and demand Assumes 80% of domestic demand for the whole of Iraq to be in the South of the country
May 2010 7

LR :Licensing Round 1 & 2

2.0

Basrah Gas Company:

A Gas Solution for South Iraq

May 2010

South Gas Joint Venture Key Facts

Shareholders: South Gas Company (51%), Shell (44%), Mitsubishi (5%)

May 2010

Infrastructure Master Planning

Repair/Rejuvenation Plans in place and Development Plans ready for
implementation West Qurna area
Existing operational capacity

North Ramaila

North Rumaila NGL Plant Surplus Train NGL train New NGL trains

Rehabilitated existing facilities Expansion / new facilities

Domgas

Export South Ramaila

NGL 1
Khor Al-Zubair NGL/LPG LPG 1 Plant LPG 4+

Zubair

LPG 2 NGL 2 LPG 3 LPG Terminal

Domgas

May 2010

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Gas Infrastructure Chain - Development and Utilisation

existing operational issues

Shell has gained good insights into the current gas infrastructure and the
Domestic Gas Gas Treatment Plant

Infield compression, degassing stations, pipelines Gas Transmission Pipelines Gas Compression Stations

NGL Extraction

NGL Extraction NGLs for domestic and export

Oil Export
May 2010 11

Shells in country activities and early gas capture

Development of Iraq Gas Master Plan together with MoO and Mitsubishi (2005) First IOC to re-enter South Iraq in September 2008. More than 700 site visits to oil & gas facilities in Basra province To date, the South Gas Company and Shell have completed the following quick wins: - Captured 135 MMscf/d (20% of total amount flared) - Reduced CO2 emissions by some 4 MT/a - $500mln/annum value created for SGC and $350mln one off savings* - 18MW of power re-established and 52MW of new power in the pipeline

- Completed early social investment projects

*Source: Shell estimates

May 2010

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Shells in country activities and early gas capture (continued)

Quick Wins underway: North Rumaila Compression Stations Upgrades target capture 90MMscf/d - Compressor repairs and re-routing of LP gas to other station - Sour Gas 1st stage gas capture - Repair and replace the gas blowers in all stations South Rumaila target capture 60MMscf/d - Re-instate and repair compressors and re-route 1st stage gas West Qurna compression & North Rumaila Plant target capture 150MMscf/d - Complete gas pipeline to Rumaila plant, re-instate sweetening facilities at NR plant - Construct compression booster station at North Rumaila plant Zubair compression and KAZ Plant target capture 80MMscf/d - Complete Zubair compression stations, and installations of pipelines to KAZ plant
*Source: Shell Total Quick estimates Wins target of over 515MMscf/d* of flared gas and over 15MT/a CO2 May 2010 *
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Technical Quick Wins (under the HoA)

K03 Compressor Repair

Joint team at KAZ Plant

Joint work at KAZ

14 May 2010 Frame 5 Procurement

Working Jointly with SGC

North Rumaila Plant Shut Down Inspections October 09

May 2010

15

Shell in Basrah since 2008

Stakeholder Town hall meetings in Basrah

1st Joint Mgt Com. in Basrah (outside the Shell Office)

Handover of refurbished Workshop to Vocational Training Center

May 2010

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Shell staff at KAZ Plant

Shell in Basrah since 2008

Vocational Training Centre Shell solarpowered street lighting project

Celebration of Quick Wins with South Gas Co

Basra Oil Training Institute

Training Certificates Award in Basra

May 2010

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3.0
Challenges and Solutions

May 2010

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Q&A

May 2010

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