Iraqi Cabinet approves initial gas deal with Shell

The agreement calls for establishing a joint venture between the state-run South Oil Co. and Shell to exploit the fields, the statement added without any other details.

In June, Oil Minister Hussain al-Shahristani told parliament that Iraq was expected to finalize a deal this summer that would enable it to exploit flared associated gas for domestic use and exports.

Shell had approached the Oil Ministry in December with its plans and since then meetings have been held outside Iraq, mainly in Damascus, Syria.

Shell is expected to invest $3 billion to $4 billion over five years to gather at least 500-600 million cubic feet of flared gas per day from the southern fields.

The state-run South Oil Co. is expected to control 51 percent of the venture, while Shell would hold the remaining 49 percent.

The agreement provides for construction of a number of liquefied natural gas facilities, the statement said.

According to Iraqi oil officials, Iraq loses approximately $40 million worth of natural gas each day because it is either re-injected into wells or burned due to a lack of sufficient infrastructure to exploit it for consumption or export.

The agreement would be Iraq's second major hydrocarbon deal since the U.S.-led invasion of 2003 that toppled Saddam Hussein.

Last week, the Cabinet approved a $3 billion deal with China to develop the Ahdab oil field in southern Iraq.