Oil Minister Hussein al-Shahristani also announced that a long-running row between Iraq and the autonomous northern region of Kurdistan over oil revenues had been resolved, in a further boost to the government's energy sector.

The planned gas field auction follows the signing of contracts last year with foreign firms to develop 10 oil fields across Iraq, aimed at raising crude output, currently 2.4 million barrels per day, to between 10 to 12 million bpd.

"We are announcing the third bidding round to develop some of the gas fields in Iraq after we achieved big success in the first two bidding rounds," Shahristani told reporters in Baghdad.

"We expect to receive the offers (for the gas fields) and we will open them on September 1," he said.

Contracts signed after last year's two bid rounds followed the first opening up of Iraq's energy sector since it was nationalised by the Baath party in 1972, seven years before now executed dictator Saddam Hussein became president.

All contracts awarded under the bidding rounds are service agreements where Baghdad pays the foreign company fixed fees based on production quotas rather than a share of profits based on sales.

Iraq produces a negligible quantity of gas compared with the size of its reserves, and currently flares off most of what it produces as it lacks the capture technology needed to use the gas for electricity production.

"The reason behind offering these fields is Iraq's increasing need to feed the electricity stations, because Iraq is suffering from a chronic lack of electricity," Shahristani added.

The three gas fields on offer contain total estimated reserves of 11.2 trillion cubic feet (317 billion cubic metres).

The biggest field, Akkaz, which is 50 kilometres (30 miles) long and 18 kilometres wide, is west of Baghdad in Anbar province and contains 5.6 tcf.

The second field, Mansuriyah, is located in Diyala province northeast of Baghdad, and has reserves of 4.5 tcf.

Both Akkaz and Mansuriyah -- in provinces where the authorities have been combatting insurgents -- were offered in Iraq's first bid round on June 30, but not awarded.

The third gas field in the auction announced on Thursday is Siba, located in the southern province of Basra near the borders of Iran and Kuwait. It has reserves of 1.1 tcf.

Under the plans unveiled by Shahristani, information on the gas fields will be published on June 1.

Some 45 companies approved to bid in last year's auctions will be eligible for the gas field tender and will be invited to attend a technical briefing in Baghdad on August 1, before an official bid document is issued two weeks later.

Only at the September 1 auction will companies finally submit their bids.

On the central government's dispute with the Kurds, Shahristani said the matter had been settled.

"We reached an agreement with the Kurds that all revenues will be handed over to SOMO and the Iraqi government will be responsible for paying the extraction expenses in Kurdistan," he said.

SOMO is Iraq's State Oil Marketing Organisation which deals with sales of crude and other petroleum-based products.

Iraqi Kurdistan halted oil exports in October last year due to a payment dispute with Baghdad.

Shahristani also announced that a four-billion-dollar gas production deal with Royal Dutch Shell in southern Iraq has been finalised and is awaiting cabinet approval.

The Anglo-Dutch firm initially signed the agreement with the state-owned South Oil Company in September 2008 to form a joint venture to extract gas from fields near the southern port city of Basra.

The details of the venture were initially to have been hammered out within 12 months of the initial signing.