Iran has signed a trilateral memorandum of understanding (MoU) to pump gas across Iraq to Syria in the hope of one day supplying Europe, a senior Iranian energy official said on Monday.

Iran has the world's second-largest gas reserves and has long dreamt of boosting exports to Europe but western sanctions over Tehran's disputed nuclear programme prevented it from getting hold of technology to liquefy gas for export by tanker.

Iran's own gas consumption has risen more markedly than its output, making Iran a net importer of gas over the last few decades. But it remains hopeful of some day being able to produce enough to sell some excess gas via pipeline to Europe.

"The pipeline to transfer Iran's gas to Syria has an estimated construction cost of $10 billion," Hossein Bidarmaghz, managing director of the National Iranian Gas Export Company (NIGEC) told Reuters from the southern port of Assalouyeh where the agreement was signed on Monday.

"It will be inaugurated within the next three to five years ... The final aim of this project is to reach out to  the European market," he added.

Sanctions have forced foreign companies with the modern technology to liquefy gas for export to pull out of Iran's potentially lucrative energy sectors, leaving Tehran to look for new sources of funding and delay LNG export plans indefinitely.

Iraqi's oil minister Abdul-Kareem Luaibi said sanctions should not impact the new pipeline project to take gas from Iran's huge South Pars field north through Iraq and on to Syria.

"The American sanctions have no impact on this gas contract with Iran," Iran's semi-official Mehr news agency reported Luaibi as saying. "Iraq is an independent country and we don't follow other countries' policies."      

Under the plan outlined in the MoU, which Iranian officials said should be finalised next year, Iran's gas could be sent through a 5,000-km pipeline across Iraq and Syria before heading across Lebanon and under the Mediterranean Sea to Europe, Iranian media said.

"It was a dream for Syria which now has come true," Syrian Oil Minister Sufian Alao told Mehr. Bidarmaghz told Reuters the ongoing turmoil in Syria would not hinder the project.

"In less than a month three legal, financial and technical joint workshops will be formed for inking the final gas contract," Javad Oji, the head National Iranian Gas Co (NIGC), was quoted as saying by Mehr.   

He said Iran could double its daily gas production capacity from the current 600 million cubic metres (mcm) to 1.2 billion within three years. If Iran can also control its own appetite for gas, it could export as much as 250 mcm/day if all the 24 projected phases of the South Pars gas field are developed, he said.

Iran was a net exporter of gas for the first time in several years when production hit 138.5 bcm in 2010, according the latest BP Statistical Review. But it still only produced 1.6 bcm, or around 4.1 mcm/day, more than it consumed that year.

Oji said the Iraq-Syria project was a second route option for Iran to export any available gas to Europe. Iran, with almost 16 percent of the world's total gas reserves, already exports gas to Turkey when it can. But Iran also has to import the heating fuel during winter from Turkmenistan. - Reuters