BAGHDAD (AP) -- Iraq and Royal Dutch Shell PLC signed a deal to establish a joint venture that will tap natural gas in southern Iraq, the government said Monday.
Iraqi Oil Minister Hussein al-Shahristani and four executives from the Anglo-Dutch company signed the deal, Iraq's second with a foreign company since the U.S.-led invasion in 2003.
The joint venture with the state-run Iraqi South Oil Co. will invest in natural gas in the southern oil-rich province of Basra, Oil Ministry spokesman Assem Jihad said. Work will start early next month.
Iraq will hold 51 percent in the venture and Shell 49 percent.
Some of the extracted gas will cover domestic needs in power stations and factories, while the majority will be bought by Shell at market prices and exported, Jihad said.
Iraq says it loses about $40 million worth of natural gas each day, partly because of a lack of infrastructure to exploit it for consumption or export.
Shell is expected to spend $3 billion to $4 billion over five years to gather at least 500-600 million cubic feet of flared gas per day from southern fields. Flared gas is a byproduct of oil production.
The agreement also provides for construction of a number of liquefied natural gas facilities.
Earlier this month, Iraq and China signed a $3 billion deal with China to develop the Ahdab oil field in southern Iraq.
China National Petroleum Corp. will develop the field for 20 years. It's expected to produce up to 25,000 barrels per day after three years, and eventually reach 125,000 barrels per day.
Iraq has the world's third-largest oil reserves with an estimated 115 billion barrels. It also sits on an estimated 112 trillion cubic feet of natural gas reserves, according to the ministry.