Iraq finalised a $17-billion joint venture deal with Shell and Mitsubishi to capture and process gas from its southern oil fields, at a ceremony at the oil ministry on Sunday.
The deal was signed by Shell CEO Peter Voser, Mitsubishi Vice President Tetsuro Kuwabara and Iraqi Oil Minister Abdelkarim al-Luaybi.
"Today's event represents a big change in the oil industry," Luaybi said, adding that the deal constitutes the best use of the gas in line with Iraq's needs.
"We are pleased to be partners in this project," said Shell's Voser.
"Iraq is now an important partner for us in the Middle East," he said.
Earlier this month the Iraqi cabinet approved the deal which creates the Basra Gas Company, a joint venture to process associated gas from the Rumaila, Zubair and West Qurna-1 fields.
"The company will start its work in a year, and before the end of this year we will deal with the needed procedures related to the company's administrative structure," said Ahmed Shamaa, the deputy oil minister in charge of refineries.
"We will also work on completing bilateral agreements signed between the investors," he said.
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Shamaa had previously said that the accord was favourable to Iraq because of the significant amount of gas that can be used for electricity and industry, and revenues that will total $31 billion over the 25-year period.
State-owned South Gas Company will hold a majority 51-percent stake in Basra Gas, while Shell will have 44 percent and Mitsubishi five percent, government spokesman Ali al-Dabbagh said.
He said the total investment would be "$17 billion for a period of 25 years."
The output capacity of the proposed project will be two billion cubic feet, or 56.6 million cubic metres, per day, Dabbagh said.
Luaybi also said on Sunday that Iraq is waiting for a reply from oil giant ExxonMobil to various letters it has sent the company.
Exxon has signed an oil exploration contract with the autonomous Kurdistan region in north Iraq, angering Baghdad, which says all contracts must be with the central government.
"We sent three letters, two of them from the oil ministry and the third from the office of the prime minister, and we may send a confirmation letter tomorrow," Luaybi said.
"We are awaiting a reply, and in light of that there will be a clear stance from the ministry and the government," he said.