The 25-year project, one of the largest Iraq has signed with foreign energy firms, is meant to help harness more than 700m cubic feet per day of gas being burned off at southern fields and will ultimately handle 2bn cubic feet per day, officials said.
“This day represents a historic change in the Iraqi oil industry ... the best utilisation of (associated) gas to meet the increasing needs for gas in Iraq,” Luaibi said at a signing ceremony attended by Shell chief executive Peter Voser.
OPEC member Iraq has signed a series of deals with foreign oil companies to modernise its energy industry after years of war and economic sanctions.
Its official goal to raise production capacity to 12m bpd by 2017 would vault it into the top echelon of global producers, although officials say 8m bpd capacity is more realistic.
Increased crude production is expected to bring huge increases in associated gas output and Iraq may soon produce more gas than it can use, opening up the possibility of gas exports.
The Shell deal will involve the creation of the Basra Gas Co joint venture, in which the government will hold 51 percent, Shell 44 per cent and Mitsubishi five per cent.
The project aims to capture gas at Iraq’s workhorse field, Rumaila, as well as Zubair and West Qurna.
Intermittent electricity is one of Iraqis’ major complaints against their government. Power supply is about half of demand.