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BAGHDAD–Iraq gave final approval Sunday to a deal by a Shell-led consortium to develop one of its largest oilfields, marking a crucial step toward the nation’s postwar rebuilding by boosting the production of its most lucrative resource.

Royal Dutch Shell PLC and its partner, Malaysia’s state-run Petronas, won the right to develop the 12.5 billion barrel Majnoon field last month during Iraq’s second postwar bidding round. As part of the deal, Shell and Petronas will pay the Iraqi government a $150 million (U.S.) signing bonus.

At a Baghdad signing ceremony, Oil Minister Hussain al-Shahristani hailed the deal as a "major step that will transform the region from an area of misery and deprivation into a prosperous one."

Shell chief executive Peter Voser refused to say how much money will be spent on the project.

The oil deal for Majnoon, located in Basra province near the Iranian border, was one of seven the Iraqi government awarded last month.

The 20-year contract calls for the companies to be paid $1.39 per barrel produced above current output levels. The firms have said they hope to raise production from the current 45,900 barrels per day to 1.8 million barrels per day by 2020.

The Majnoon field was discovered in 1976 and was partially developed until the Iran-Iraq war halted work. Oil production resumed in 2002.

For Iraq, the oil deals mark a crucial step forward in the country’s so-far faltering bid to raise oil output. Although it sits atop the world’s third-largest proven reserves of conventional crude oil, Iraq produces a comparatively modest 2.5 million barrels per day, of which about 1.9 million barrels a day are exported.

Of the seven deals awarded in December, Iraq’s Cabinet has approved four, including Majnoon, and has asked for changes to proposals for the remaining three – awarded to consortiums led by Russia’s private oil giant Lukoil, China’s CNPC and Russia’s Gazprom – before signing off on them as expected by the end of January.

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