Iraq's cabinet on Tuesday approved a $17 billion deal with Royal Dutch Shell and Japan's Mitsubishi Corp to process gas found with oil, which is currently burned off, a government spokesman said.
"The council of ministers approved the establishment of the Basra Gas Company, which will process associated gas from the Rumaila, Zubair and West Qurna-1 oil fields," Ali al-Dabbagh said in a statement.
State-owned South Gas Company will hold 51 percent of Basra Gas, while Shell will have 44 percent and Mitsubishi five percent, Dabbagh said.
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He said the total investment would be "$17 billion for a period of 25 years."
"The capacity of the proposed project will be two billion cubic feet," or 56.6 million cubic metres, per day, Dabbagh said.
The government will impose an income tax of 35 percent on Basra Gas's profits, plus a five-percent import duty on equipment and materials, while a one-percent export duty on the gas will be paid to the State Oil Marketing Organisation, he added.
Ruba Husari, the editor of the Iraq Oil Forum, estimated Iraq's income at $58 billion over the life of the project, from taxes, customs, exports fees, South Gas's share of the profits, and the sale of raw gas to Basra Gas Co.
"But the most important benefit to Iraq is definitely the currently wasted $1.8 billion year worth of gas that is being burnt daily and flared in the air," Husari said.