Shell is set to become the first Western energy company to return to Baghdad since the Iraq war started in 2003.
Shell will own 49% of the venture
The Anglo Dutch giant has agreed a joint gas venture worth more than £2bn with the Iraq oil ministry.
It will capture unwanted gas burned off during oil production, for domestic consumption and export.
State-owned Southern Oil Co will own 51% of the venture and Shell 49%.
“Europe is looking for supplies of gas from Iraq,” an Iraqi oil spokesman said.
“Security used to be a deterrent, but now companies feel that security has improved and this will encourage others to come in.”
Energy broker Rob Laughlin was of the same opinion.
He told Sky News: “I think we’re going to see other people following Shell.
“Now that Iraq has become a safer place companies now feel more secure in operating out there.
“Pipeline ruptures seem to be a thing of the past as far as Iraq is concerned.”
Iraq has the world’s third-largest oil reserves and vast reserves of gas which are almost completely untapped.