The Iraqi cabinet has approved a preliminary natural gas deal between Royal Dutch Shell and the state-run South Oil Company, the government spokesman said on Sunday.
Spokesman Ali al-Dabbagh said in a statement that "the cabinet had approved a preliminary agreement with Shell company for investment in flaring gas in Basra province in a partnership between Shell and the South Oil Company."
Iraq said earlier this year that Shell had submitted a proposal to develop Iraq's natural gas resources, planning to supply the local market and export through its southern ports or through a pipeline.
Iraq, with the world's third largest proven oil reserves, has said it will prioritize development of its southern gas reserves and could become a major supplier to Europe.
Oil Minister Hussain al-Shahristani, in an interview with Iraqiya state-run television broadcast on Sunday, said a major natural gas contract would soon be announced. Shell has also been in talks with Iraq on a short-term technical service oil contract, one of half a dozen Iraq has said it hopes to finalise before it brokers long-term deals to exploit its massive, easily accessible oilfields.