The joint venture agreement, in which Shell holds a 44% stake, Mitsubishi 5% and Iraq's South Gas Co. the remaining 51%, was drafted in 2008 but has run into political and technical problems.
According to the Heads of Agreement signed in late 2008, it was to be finalized early this year.
Asri Mousa, a top adviser to the oil ministry, said some legal phrases needed to be agreed before the draft could be resubmitted to the cabinet, which has given preliminary approval already.
"When we get this approval, the company can work on the ground starting next year," he told Platts on the sideline of the CWC Iraq Mega Projects conference in Istanbul.
Opposition has come from some members of parliament and others who object to the deal because it was agreed through direct bilateral negotiations with Shell initially -- Mitsubishi joined later -- without an international tendering process and for not including local authorities in the negotiations.
Earlier this week, the party of former Prime Minister Ayad Allawi, who is a contender for the job following an inconclusive general election in March, issued a statement that all long-term deals with foreign companies would be invalid and reviewed when the next government is in place.
Under the 20-year agreement, the joint venture would gather gas that is otherwise flared for supply to local power stations in southern Iraq with the possibility of exports some time in the future once demand is met either by pipeline or as LNG.
The oil ministry has been criticized for not moving quickly enough with implementation of the agreement.
"Nothing has been delayed by the minister, [it has] nothing to do with politics," said Mousa. "It is pure negotiations. Everyone wants to get the best for their side."
He added: "We want to make sure that in the future, there are no misunderstandings."
He said that political complaints have died down because the gas, currently being wasted, will meet electricity and other local demand.
Associated gas projects are more complex than dry gas or oil projects, Mousa explained.
Iraq, which has been rebuilding its energy infrastructure after decades of war and sanctions, does not have the ability to process or store the associated gas it produces. This has led to severe power shortages in several parts of the country and sparked demonstrations in a number of Iraqi cities
during the sweltering summer months, when demand for air conditioning is high.
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