Iraq plans to build on its nascent gas sector to power a new petrochemicals industry, looking to foreign firms to invest $35-50 billion from 2017-2023, a senior official told Reuters.

Mohammed Abdullah, a deputy minister with responsibility for companies, said the ambitious plan was to produce 10 million tons of petrochemicals a year during that period.

"The amount of investments which we could attract from this field to the country could reach $35 billion to more than $50 billion," Abdullah told Reuters in an interview.

"This is our current view and that could be revised upwards in the future," he said.

Abdullah said the ministry was in negotiations with Royal Dutch Shell and Chevron Phillips Chemical to invest in some of the mooted projects.

Shell is in talks to build a petrochemicals factory that will cost at least $8-10 billion in the southern oil hub of Basra, Abdullah said, adding the firm had signed a Memorandum of Understanding with the ministry.

Chevron Phillips Chemical is interested in rehabilitating a petrochemical factory in Basra and in building a new one, Abdullah said, without elaborating on the details.

Iraq in November signed a final $17 billion deal with Royal Dutch Shell and Mitsubishi to capture flared gas at southern oilfields, which is meant to help harness more than 700 million cubic feet per day of gas being burned off.

It will handle 2 billion cubic feet per day by 2017 officials say.

The gas projects will be used as feedstock for the petrochemicals industry and should also help to boost the country's patchy power supply, officials say.

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

Gas surplus expected

Iraq's gas goal is linked to peak production of oil in the southern fields. The target of oil production capacity of 12 million bpd by 2017 would vault it into the top echelon of global producers, although officials say 8 million bpd is more realistic.

Increased crude 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 ambitious plans of the oil ministry made us ambitious, too," Abdullah told Reuters. "We want to walk with them in parallel. As they progress in increasing oil production, we will progress in increasing petrochemical industries."

The plant under discussion with Shell will produce different petrochemical products for plastics, Abdullah said, without mentioning specific materials.

A lot of Iraq's dilapidated factories have been lying idle since the U.S.-led invasion of 2003. Some were looted and destroyed while the few that remain are outdated.

"We found a fast method to solve our problems," Abdullah said. "What the industry ministry wants to do is work with the raw materials which are available. And what is there for us now is gas."