* Congo, Rwanda agree on Lake Kivu gas deal
* Project to produce 200 MW of power
* Deal highlights improving relations
By Joe Bavier
BUKAVU, Congo, June 12 (Reuters) - Former foes Congo and Rwanda have agreed to a joint project to produce 200 megawatts of power from methane gas reservoirs in the lake on their shared border, a senior Congolese power official said on Friday.
The joint power generation deal is the latest sign of improved relations between Rwanda and the much larger Democratic Republic of Congo, who have fought wars, largely over mineral resources in Congo's east, during the last 15 years.
"We discussed with Rwanda's energy minister and have agreed to produce 200 megawatts together. 100 megawatts will go to Congo, and 100 megawatts will go to Rwanda," Eugene Serufuli, head of Congo's national electricity company, SNEL, said.
Lake Kivu, which straddles the border between the two Great Lakes region countries, contains large amounts of the highly combustable gas dissolved in its deep, cold waters.
Serufuli did not give any further details on the project.
Rwanda has already begun extracting small amounts of methane using a demonstration rig on its side of the lake. It was producing two megawatts of power by the end of 2008.
Serufuli said total reserves, which are estimated at 55 billion cubic metres of gas, have the potential to produce around 700 megawatts over at least 50 years.
The two countries will probably extract the remaining 500 watts independently after the joint exploitation project is completed, he said.
The power deal follows joint military operations earlier this year to root out the Rwandan Hutu rebels which have been at the heart of much of the violence between the two nations.
Rwanda first invaded Congo in 1996 to hunt down the rebels, some of whom took part in Rwanda's 1994 genocide. But Kigali's army ended up toppling the government in Kinshasa and much of the fighting in Congo degenerated into a scrap over mines.
The military operations marked a dramatic shift in regional politics, with Rwanda helping end a Congolese rebellion Kigali had been previously accused of backing in exchange for being allowed to send its army to fight the Rwandan rebels.
Serufuli said the deal was also part of the framework of improving relations between countries and would dispel security concerns the investors may have before they get involved in the $300 million plan.
"If we had been going into this on our own, we would see how we would have problems in this area. But I think a project of this kind will interest investors," he said.
Both countries are struggling to cope with growing demands on their current meagre energy production.
Rwanda's growing population and rapidly developing economy risk outstripping the country's supply of power. Congo's east is one of the most densely-populated parts of the country and, though rich in minerals, insecurity has stalled development. (Editing by David Lewis)