UPDATE 1-Shell seeks Iraq gas deal, decision soon-minister

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BRUSSELS, Jan 31 (Reuters) - Royal Dutch Shell (RDSa.L) has submitted a plan to develop natural gas resources in Iraq and the government will respond to the idea soon, Iraq's oil minister, Hussain al-Shahristani, said on Thursday.

"Shell has made a proposal to Iraq for gathering gas and building a facility to supply the local market and export additional gas ... through southern ports or a pipeline," he told reporters during a visit to Brussels.

"That proposal is under consideration and we will be responding very shortly."

Al-Shahristani said Baghdad was prioritising development of southern Iraq's gas and the region could provide "a significant amount" of gas to Europe.

He was speaking after meeting European Energy Commissioner Andris Piebalgs to discuss enhancing energy cooperation between Iraq and the European Union which is seeking to diversify its energy supplies.

Piebalgs said the EU wanted to see Iraq play "a full role" in the Arab Gas Pipeline which will supply the EU, including by linking up to the Nabucco pipeline which will take gas through Turkey to western Europe from the Caspian region from 2011.

Arab countries including Egypt and Iraq hope to supply natural gas to Europe by the end of 2008 and the final phase of the project linking the Syrian gas network with Turkey began late last year.

European countries, facing rising demand for gas, hope the large and relatively unexploited fields around the Middle East and Central Asian countries around the Caspian Sea could help reduce the bloc's reliance on Russian gas.