Iraq said Wednesday it would proceed with work alongside British energy giant BP plc (BP) on a controversial northern oilfield, in a move likely to spark anger in the country's Kurdish region.

The development of the Kirkuk oilfield, which lies amid a swathe of disputed territory in north Iraq , is at the heart of a row over land, oil revenues and the powers of the central government. The dispute has been raging for years between Baghdad and the autonomous Kurdistan region.

Iraqi Oil Minister Abdelkarim al-Luaybi, Kirkuk provincial Governor Najm al-Din Omar Karim and BP Chief Executive Bob Dudley visited the field after holding talks in the province's capital.

"The contract with the British company will be executed by treating the decline in oil production at Kirkuk oilfield, which has reached 230,000 barrels (per day), and the company will work on surveying the fields and sites of Kirkuk oilfield throughout the contract period," Mr. Luaybi told AFP.

Current output represents a significant drop off from the field's peak, and Iraqi officials hope to increase production to 500,000 barrels a day in three years.

The visit was the first since the British energy giant and Iraq signed a deal in September which calls for BP to carry out surveys at the oilfield, but which could eventually lead to the company working to increase the field's output.

Developing the field is part of Iraqi efforts to boost oil output to fund much-needed reconstruction.

At the time the contract was announced, the Kurdistan region condemned the deal. A spokesman for the region's natural resources ministry didn't immediately respond to requests for comment.

The dispute over oil is one of several between the central government and Kurdish authorities, who want to incorporate a swathe of land into their autonomous region over the central government's objections.

The federal and regional governments also disagree over the apportioning of oil revenues, and Baghdad has been angered by the Kurdish region signing contracts with foreign energy firms without its approval.

Diplomats and officials say the dispute over territory in particular is one of the main long-term threats to Iraq 's stability.
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