The Iraqi cabinet today approved an agreement with Royal Dutch Shell and Mitsubishi Corporation, forming a joint venture to collect and process raw gas from the Rumaila, Zubair, West Qurna 1 and Majnoon fields in the southern part of the country.

The primary market for the gas will be Iraq, but any surplus can potentially be exported.

The joint venture, held 51% by Iraq’s South Gas Co., 44% by Shell and 5% by Mitsubishi, will be called Basrah Gas Co. (BGC) and will gather raw gas that is currently flared because of a lack of infrastructure to collect it.

Shell will provide project management and technical expertise with the intention to facilitate the learning and development of Iraqi staff to progressively assume key positions in the management of the company.

Some 700 million standard cubic feet of gas is currently burned off each day in southern Iraq. At current prices, the gas is worth about $1.8 billion per year. Burning it creates as much greenhouse gases each year as 3.5 million cars.

In September 2008, Shell signed a preliminary agreement with the Iraqi Ministry of Oil for a gas gathering project. The agreement established the commercial principles to establish a joint venture between Shell and South Gas.