BAGHDAD (AFP) – Iraq risks missing a one-year deadline to strike a deal with energy giant Royal Dutch Shell for a four-billion-dollar gas production deal in southern Iraq, a government spokesman told AFP on Tuesday.

Oil ministry spokesman Assem Jihad acknowledged that negotiations between Baghdad and the Anglo-Dutch firm "can be extended", nearly a year after Shell formally signed a gas joint venture with an Iraqi state-owned company, the details of which were to have been hammered out within 12 months.

"The negotiation to form a joint Iraqi-foreign company ... is still ongoing, and the period which was previously announced of one year can be extended," Jihad said.

He added that Shell would be reducing its stake in the joint venture, with Japanese firm Mitsubishi making a five-percent investment in the project, reducing Shell's stake to 44 percent.

Shell had been due to take a 49 percent stake in the project when the agreement was signed with the state-owned South Oil Company in September 2008. The remaining 51 percent will be in Iraqi government hands.

Jihad said that an agreement was "not far off" and added that "the company will start its work immediately after the announcement of its establishment."

Shell became the first Western major in nearly four decades to enter Iraq through a deal with Baghdad when it signed the joint venture.

The venture will extract gas from fields near the southern port city of Basra, and Oil Minister Hussein al-Shahristani said at the time that Iraq's stake in the project would be the facilities and equipment already in place, while Shell would provide a cash infusion.

The Baathist regime that ruled Iraq until the US-led invasion threw out foreign oil companies when it nationalised the sector in 1972.

In June, Iraq launched its first invitation to tender for energy contracts since then, but investors snubbed all but one of the eight contracts put up for auction.

British energy giant BP and China's CNPC International Ltd. were the only companies to be successful.

Shahristani said this month that a second round of bidding is due in "the first half of December", ahead of parliamentary elections scheduled for the following month.

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