Iraq 's giant Majnoon oil field, operated by Royal Dutch Shell PLC (RDSB.LN) will start production later this month at a rate of 175,000 barrels a day, a senior Iraqi oil official said Wednesday.

Production from Majnoon, believed to hold more than 13 billion barrels of oil, would reach 200,000 to 250,000 barrels a day in the first quarter 2014, Ali Nazar, a senior official at state-run Iraqi oil marketing company SOMO, told reporters on the sidelines of a meeting of energy ministers in Seoul .

The 175,000 barrels a day output, which is the level required for the Anglo-Dutch company to start recovering costs under its deal with the Iraqi oil ministry, is a critical milestone in Shell's plans to develop the field. Because Majnoon's existing pipelines aren't big enough to deal with the anticipated increase in output and old facilities weren't up to international standards, Shell has had to concentrate its efforts on the necessary upgrades needed before output at the targeted amount can begin.

Majnoon, located near the city of Basra in southern Iraq , is one of four major fields that Iraq is developing with foreign companies. These fields are expected to double Iraq 's total output that now stands at 3.2 million barrels a day.

"We are happy with the progress of work made by Shell in Majnoon," Mr. Nazar said.

Iraq signed a series of service contracts with major oil companies such as Shell, Exxon Mobil Corp. (XOM), Total (TOT), BP PLC (BP), and Eni SpA (E) at the end of 2009 to develop its oil fields.

Shell and Malaysia 's Petronas Gas Bhd (6033.KU) were awarded the deal in December 2009 to develop the field located in southern Iraq near the Iranian borders. Shell owns 45% of the venture and Petronas owns 30%, with the Iraq state-run company holding 25%.

They have pledged to eventually raise production from Majnoon to 1.8 million barrels a day.
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