The agreement will mark the first major gas deal between an international oil company and Baghdad since the US invasion in 2003, and follows Shell’s involvement in the country’s gas master-plan over the past two years.

Shell executives had previously expected a five-year deal, but it is now hoped this will be expanded into a 20-year contract following a formal heads of agreement signing in Baghdad in October.

The two sides met in Damascus in June to finalise an agreement, following a series of proposals sent by Shell to Iraq’s Oil Ministry earlier this year (MEED 13:6:08).

One executive within the ministry tells MEED the deal will involve the gathering of up to 800 million cubic feet a day (cf/d) of flared gas from Iraq’s major southern oil fields and the possible construction of liquefied natural gas (LNG) facilities.

“It will focus on fields in the Basra region and will also include any new fields that are discovered in that area,” says the official.

The South Gas Company is expected to take the controlling 51 per cent shareholding in the venture, with Shell holding the remainder.

Iraq’s natural gas reserves are estimated to be 110 trillion cubic feet, making them the fifth largest worldwide.