Iraq's governors and oil supermajor Royal Dutch Shell have struck an accord setting the commercial points for a joint venture between South Gas Co. and Shell to process and market all associated natural gas produced in the Goernorate of Basra in southern Iraq, an area of 19,000 square kilometres.

The approval followed a quiet nod by a council of ministers earlier in September and gives the go ahead for 700 million cubic feet per day of gas produced at oilfields but now flared.

"By capturing and processing this natural gas, the JV should create an important and reliable supply of domestic energy, reduce greenhouse gas emissions, and create significant value for Iraq," a Shell statement read.

The joint-venture will purchase associated natural gas from upstream operations; own and operate existing gas gathering, treating and processing facilities and invest to repair non-functioning assets and develop new facilities. The Iraqi people will be sold liquefied petroleum gas, natural gas liquids, natural gas for power generators, plus gaseous fuel. A liquefied natural gas facility for exports is planned for "the future".

South Gas Company will be the 51 percent majority shareholder in the JV, with Shell holding 49 percent.

Tags: Royal Dutch Shell plc