Exxon sells controversial Iraq oil stake to PetroChina

American energy giant Exxon Mobil on Thursday sold part of its controversial stake in a massive Iraqi oilfield to PetroChina and Indonesia's Pertamina amid a long-running row with Baghdad.

The sale of the stake in the West Qurna-1 field in south Iraq, one of the country's largest, marks a key step towards resolving the dispute with the central government over Exxon's contracts with the autonomous Kurdish region.

"The agreement was signed for Exxon Mobil to sell part of its 60 percent stake," oil ministry spokesman Assem Jihad told AFP.

"Representatives of all the companies signed the deal today with the Iraqi government in the ministry."

PetroChina takes a 25 percent stake in the oilfield, while Pertamina will hold 10 percent, thereby reducing Exxon's share to 25 percent.

Anglo-Dutch giant Shell will retain its 15 percent stake, while the Iraqi government holds the remaining 25 percent.

Asked whether the sale resolved the dispute between Baghdad and Exxon, Jihad replied: "We do not have problems with international companies who respect their promises to the Iraqi government, and we respect all efforts towards investing in the oil industry in Iraq."

In January 2010, Iraq completed a deal with Exxon and Anglo-Dutch giant Shell to develop production at the field, which has proven reserves of 8.5 billion barrels of oil.

In October 2011, however, Exxon signed an oil exploration deal with the Kurdistan region in northern Iraq covering six areas, including two that are claimed by both Baghdad and Kurdistan.

The Kurdish deal infuriated Baghdad, which says all oil contracts must go through the central government and regards any that do not do so as illegal.

Iraq has repeatedly given an ultimatum to Exxon to either sell its stake in West Qurna-1 or give up its Kurdish deals, but has never set a deadline or outlined any potential consequences.

The American energy firm nevertheless told Baghdad a year ago that it was looking to sell its stake.

Iraq is heavily reliant on oil production for state revenues, and is looking to dramatically ramp up crude output in the coming years to fund much-needed reconstruction of its conflict-battered economy.

The Exxon dispute is one of several between Baghdad and the Kurdish region -- the central government also regards other contracts signed by the Kurds to be illegal because they were not approved by the federal ministry.

The two sides also disagree over claims to a swathe of territory stretching between Iraq's eastern and western borders, as well as the apportioning of federal oil revenues.