A joint venture between Iraq, Royal Dutch Shell PLC (RDSB.LN) and Japan's Mitsubishi Corp. (8058.TO) will by the end of this year have doubled the amount of natural gas it captures from three giant southern oil fields, reducing waste and helping feed domestic power and heating needs, a senior Iraqi oil official said Wednesday.

The venture will process 500 million cubic feet a day of natural gas by the end of this year, Iraq 's South Gas Co. Director Ali Hussein Khudhier told Dow Jones Newswires, compared with 240 million cubic feet that was being captured in November 2011 when the joint venture was agreed.

Mr. Khudhier was speaking shortly after Shell, Mitsubishi and South Gas Co. officially launched their joint venture, Basra Gas Co., Wednesday. State-run South Gas Co. holds 51% of the $17.5 billion joint venture, while Shell has 44% and Mitsubishi 5%. The venture will run for 25 years.

The three southern oil fields--Rumaila, Zubair and West Qurna 1--produce 1.1 billion cubic feet a day of gas, but some 700 million cubic feet a day of that is burned off and wasted because infrastructure does not exist to harness it, Mr. Khudhier said. "We are producing now 400 million cubic feet a day and targeting 500 million cubic feet a day by the end of 2013. We are expecting to reach 2 billion cubic feet a day in 2017," as output from those fields expands, he said.

The Basra Gas Co. will produce natural gas for power stations, and liquefied petroleum gas for cooking and heating, Mr. Khudhier said. The joint venture will meet all of Iraq 's needs for LPG next year and expects to export the fuel by the end of 2014. The venture will also produce hydrocarbon liquids that will be sent to refineries to process it into gasoline to raise its octane.

Mr. Khudhier said that the venture is expected to invest some $1.5 billion in the three years after the signing on upgrading existing gas facilities and training of staff.

He expected the new venture to start exports of gas to the international market in 2020, once it has met local needs. This could be achieved through the construction of a floating liquefied natural gas plant and terminal off the coast of the southern city of Basra in the Arabian Gulf , to be built by Shell and Mitsubishi, he said.

The LNG facility is expected to cost around $3 billion, Mr. Khudhier has said previously. The project would handle the export of 600 million cubic feet a day of LNG, he said.

Iraq has estimated natural gas reserves of 112.6 trillion cubic feet.

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