The companies say that production capacity at the $650m gas processing plant will increase to 300 million cf/d by early 2009 and will be used at power plants in Irbil and Sulaimaniyah which have a combined generating capacity of 1,250 MW.

The Kurdistan Regional Government (KRG) says the move will result in over $2bn in annual fuel cost savings.

The firms have also pledged an initial investment of $3bn in the Kurdistan Gas City complex, although it remains unclear how much each company will contribute and whether other partners would be involved in the initial seed funding.

The partners hope to eventually attract foreign investment worth more than $40bn to the city, which is designed to accommodate more than 20 petrochemicals and heavy manufacturing plants.

Last year Dana Gas and Crescent Petroleum signed a $400m agreement with KRG to evaluate its gas reserves (MEED 20:4:07).