Iraq on Monday signed a five-year deal with Pakistan Petroleum for the company to explore a massive tract of land believed to contain gas, the latest step in Baghdad's efforts to boost energy output.

Under the contract, the firm must invest at least $100 million to explore the 6,000 square-kilometre (2,300 square-mile) block covering the provinces of Wasit and volatile Diyala.

"The oil production (and) the gas production from this block will not only help the Iraqi economy, it will help the Pakistani economy also," Pakistan Petroleum chief executive Asim Khan told reporters.

"It will be a step forward from this project to other projects at national level. Inshallah (God willing), this is the beginning and we would like to see more projects."

Khan said he was not concerned by instability in Diyala province, which remains one of Iraq's most violent even as attacks have lessened nationwide in recent years compared to the country's bloody sectarian war from 2006 to 2008.

"These are not going to stop or hinder our work programme," he said. "We will overcome the security."

Pakistan Petroleum won the contract in a May 30-31 public auction, agreeing to remuneration of $5.38 per barrel of oil-equivalent eventually extracted from the block, which is thought to contain gas.

Baghdad is looking to increase its gas production to help power electricity generation stations. The country is suffering from a years-long electricity shortfall that is a persistent complaint of Iraqis.

Iraq has proven reserves of 143.1 billion barrels of oil and 3.2 trillion cubic metres (111.9 trillion cubic feet) of gas, both of which are among the highest such deposits in the world.