BAGHDAD, Oct 4: Two United Arab Emirates-based energy companies announced on Saturday that they have begun producing natural gas in Iraq’s Kurdish area.

Crescent Petroleum and its partner Dana Gas said initial gas production stood at 75 million cubic feet per day after completing the first phase of the $650-million project.

Within the first half of 2009, production will rise to 300 million cubic feet per day, the companies said in an e-mailed statement to The Associated Press.

“We are very proud of this historical milestone, as the first companies from the Middle East to invest in Iraq’s oil and gas sector,” Dana Gas upstream executive director, Ahmed al-Arbeed, said in the statement.

“This is the first project of its kind in Iraq, and it will provide important economic and social benefits for the Kurdistan region and all of Iraq,” added Majid Jafar, executive director of Crescent Petroleum.

Kurdish officials were not available to comment.

In April 2007, Iraq’s Kurds and the two companies signed the service deal to develop the Khor More gas field and to appraise the Chemchemal field.

The gas will be used to supply new power plants in Irbil and Sulaimaniyah provinces, two of three provinces that make up the regional government. The two plants are to provide a total of 1,250 megawatts of electricity.

According to Iraqi Oil Ministry figures, the Khor More field was discovered in the 1950s and has estimated gas reserves of 1.4 trillion cubic feet. But it has never been fully developed and was shut down after the first Gulf War in 1991.

The Chemchemal gas field, which has never been appraised or developed, has estimated reserves of 2.2 trillion cubic feet.

The statement said initial production will supply the power plant in Irbil, the capital of the semiautonomous Kurdish region. Later production will go to the plant in Sulaimaniyah.

The companies praised the project, saying it would help supply electricity to four million Iraqis in the region and save some $2.5 billion the Kurds pay each year to import diesel for power plants. It would also provide more than 2,000 jobs for local people, it said.

The project also includes the construction of a 180km pipeline to transport gas to the two power plants. The pipeline will have spare capacity to accommodate additional production from nearby fields.

Both companies are also working with the Kurdish regional government on plans to set up Kurdistan Gas City, which will include petrochemical, steel and other heavy industry plants.—AP