Iran expects to begin exporting gas to neighbouring Iraq by July next year, with initial volumes at 7 million cubic metres per day, a senior Iranian energy official said on Saturday.

Iraq's electricity ministry said earlier this year it had signed an agreement to import natural gas from Iran through a new 220 kilometre pipeline to feed three power plants in Baghdad and Diyala provinces.

"Gas exports to Baghdad will begin next July, with an initial capacity of 7 million cubic metres (per day)," the head of Iran's national gas export company Ali Reza Kameli was quoted as saying by state news agency IRNA.

Under the contract, which has a duration of 10 years, Iranian gas exports to Iraq will rise to 25 million cubic metres (mcm) per day by 2015 and ultimately 40 mcm/day.

Iraqi officials including Prime Minister Nouri al-Maliki visited Iran this week and discussed strengthening ties, particularly economic.

Almost 10 years after the US-led invasion that toppled Saddam Hussein, investment is needed in most of Iraq's industries, not least power generation, which produces just 8,800 MW of the 14,000 MW needed.

Kameli said the two countries were also preparing to finalise a contract in the coming weeks for Iran to export another 50 mcm/day of gas to Iraq's southern city of Basra.

The plans will depend in part on Iran's multi-phased development of the vast South Pars gas field, which has been set back by a withdrawal of international energy companies and technology suppliers due to Western trade sanctions.

On Saturday, Iranian Oil Minister Bijan Zanganeh said he hoped most of phases 12, 15 and 18 would be complete by the end of the Iranian year in March 2015.

"The management of this project is moving in the right direction," IRNA quoted Zanganeh as saying. "There is a lag in digging operations in some of the phases, but we are trying to conclude these phases under the current programme."

Although Iranian gas production has risen significantly, its domestic demand has almost doubled from 79 billion cubic metres (bcm) in 2002 to 156 bcm in 2012, gobbling fuel faster than it has been able to pump it out.

As a result, Iran has been a net importer for most of the past decade.-Reuters