Iraq signed a final $17 billion deal with Royal Dutch Shell and Mitsubishi on Sunday to capture flared gas at southern oilfields, a project that should boost production of badly needed electricity.

The 25-year deal, one of the largest Iraq has signed with foreign energy companies, is meant to help harness more than 700 million cubic feet per day of gas being burned off at southern fields.

The long-awaited deal was completed at a signing ceremony in Baghdad attended by Iraqi Oil Minister Abdul-Kareem Luaibi and Shell chief executive Peter Voser.

'This day represents a historical change in the Iraqi oil industry, represented by the best utilisation of the (associated) gas to meet the increasing needs for gas in Iraq,' Luaibi said at the ceremony.

Opec member Iraq has signed a series of deals with foreign oil companies to modernise its energy industry after years of war and economic sanctions.     

Increased oil production is expected to bring huge increases in associated gas output and Iraq may soon produce more gas than it can use, opening up the possibility of gas exports.

The Shell deal will involve the creation of the Basra Gas Co joint venture, in which the government will hold 51 percent, Shell 44 percent and Mitsubishi 5 percent.

The project aims to capture gas at Iraq's workhorse field, Rumaila, as well as Zubair and West Qurna.

Intermittent electricity is one of Iraqis' major complaints against their government. Power supply is about half of demand. - Reuters