Iraq signed a $365-million (252-million-euro) contract for Iran to build a pipeline to supply natural gas to power stations in Baghdad, a spokesman for Iraq's electricity ministry said on Friday.

The 220-kilometre (140-mile) pipeline will eventually supply 25 million cubic metres of natural gas per day from Iran to power stations in the Quds and Sadr City districts of eastern Baghdad, and two more in the capital's south, said Musab al-Mudaris.

"The Ministry of Electricity signed a $365-million contract on Thursday to build a pipeline to transport gas from Iran to Iraq," he said. "Work will begin this week, and is expected to be completed within 18 months."

The amount of gas would be enough to produce 2,500 megawatts of electricity, Mudaris said.

He added that ECG Iran would build the pipeline and Iran's oil ministry would provide the gas.

"Iran will be the first country from which Iraq will import gas for electricity production," Mudaris added.

Iraq suffers from an acute shortage of electricity, with demand outstripping supply two-fold, resulting in heavy rationing.

Iraq sits on one of the largest gas reserves in the world, but decades of sanctions and wars have prevented effective production.

Iraq's current gas production -- all of it associated gas from oil wells -- is 42.5 million cubic metres per day, but half is burned off in flares from oil wells, according to Baghdad-based analyst Ruba Husari.

At an auction in October, Baghdad awarded contracts to international companies to operate three gas fields in a bid to boost production.

earlier related report
Iraq's Al-Ahdab oil field begins production
Kut, Iraq (AFP) July 1, 2011 - The Al-Ahdab oil field in central Iraq, operated by China National Petroleum Corp, began production Friday with 60,000 barrels per day, a senior official told AFP.

"Production from the Al-Ahdab oil field started today (Friday) with 60,000 barrels per day, and that will increase to 120,000 barrels in six months," said Ahmed Abdul Redha, the official in charge of operations.

Meanwhile, Mahdi Hussein Zubaidi, the governor of Wassit province where the field is located, said the oil revenue would create jobs and finance reconstruction.

"Oil production from this field is an important resource for reconstruction projects and will reduce unemployment," he said.

The contract with CNPC, signed in 2008, allows the Chinese company to develop the field for 23 years.

Output will mostly be exported, but some will be used to fuel power generation stations nearby to ease electricity shortages.

Under the agreement, CNPC will charge a service fee of $6 a barrel, decreasing it eventually to $3.

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