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.
Shamaa had previously said that the accord was totally in Iraq's favour both because in the significant amount of gas that can be utilised for electricity and industry, and the 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.
Ruba Husari, the editor of the Iraq Oil Forum, estimated Iraq's income at $58 billion over the life of the project, or $31 billion after subsidies.
"But the most important benefit to Iraq is definitely the currently wasted $1.8 billion-a-year worth of gas that is being burnt daily and flared in the air," Husari said.