BASRA, Iraq — Iraq approved a multi-billion dollar deal with Royal Dutch Shell and Japan's Mitsubishi Corp on Tuesday that will provide much needed electricity from natural gas currently being wastefully burned off.


State-owned South Gas and Basra Gas companies in southern Iraq will take a 51 percent stake in the contract, with Shell and Mitsubishi taking a 49 percent share, government spokesman Ali al-Dabbagh said in a statement.

Iraq produces a negligible quantity of gas compared with the size of its reserves, and currently flares off most of what comes out with its crude output as it lacks the capture technology needed to use the gas for power generation.

The joint deal with Shell and Mitsubishi will exploit gas in the Rumaila, Zubair, West Qurna and Majnoon fields near Basra.

The contract was rubber-stamped at a cabinet meeting in Baghdad, almost two years after it was initially agreed in September 2008.

The government at the time said the deal was expected to be worth around four billion dollars, but no specific financial figures were given on Tuesday.

Iraq last month invited international energy firms to submit bids in a September 1 auction of three gas fields, in a third major tender aimed at developing the war-torn state's oil and gas sectors.

Existing power plants in Iraq have proved incapable of generating sufficient electricity to meet peak summer demand, forcing draconian rationing that sees consumers receive supply for one hour in five, or less.

As temperatures have hit highs of 54 degrees Celsius (130 degrees Fahrenheit), angry protesters have taken to the streets across central and southern Iraq, sparking clashes with police in which two demonstrators were killed.