OREANDA-NEWS. August 28, 2013. U.S. energy giant Exxon Mobil Corp. XOM -0.50% has asked Iraq if it can sell part of its stake in one of the country's largest oil fields to China's PetroChina, 601857.SH -0.74% two people familiar with the matter said.

The request, which is subject to review by Iraq's cabinet before a sale process can begin, comes amid government displeasure over Exxon's decision to strike separate exploration deals with the semiautonomous Kurdistan region in the north of the country.

Conversely, a deal with state-owned PetroChina would deepen China's investment in the Iraqi oil sector 10 years after a U.S.-led invasion ended Saddam Hussein's rule.

Exxon gave Baghdad formal notice that it wishes to sell less than half of its 60% stake in the West Qurna-1 oil field in southern Iraq to PetroChina, according to the people familiar with the move. Neither provided an estimated value for Exxon's stake. One of the people said the U.S. company intends to continue operating the project.

Exxon declined to comment. A PetroChina spokesman said the company, China's biggest oil producer, "intends to expand its overseas oil and gas investment."

Talk of a deal comes two weeks after PetroChina's parent company, China National Petroleum Corp., struck a separate cooperation pact with Exxon in Beijing to jointly invest in projects in China and overseas.

Exxon angered the Iraqi central government in 2011 by signing a deal with the Kurdistan region in northern Iraq. Baghdad has warned the oil company to choose between its deal in the south and the one in the north. The West Qurna-1 field has the potential to produce nearly three million barrels a day, rivaling some the world's largest oil fields.

In 2009 Baghdad signed a series of contracts with international oil majors to boost Iraq's output to 12 million barrels a day by 2017, enough to make it the largest producing country in the world. Security and infrastructure setbacks have lowered expectations to nine million barrels a day by 2020.

Exxon and minority partner Royal Dutch Shell RDSB.LN -1.33% PLC, which holds 15% stake in West Qurna-1, has continued to make progress in the \\$50 billion project. Currently the field produces 510,000 barrels a day and could hit 600,000 barrels a day by the end of this year.

The Iraqi cabinet would need to grant approval before Iraq's oil ministry allows Exxon to proceed with its selling plan. "That may take two weeks to obtain," one of the people familiar with the matter said.

Exxon was the first major oil company to sign petroleum contracts with the Kurdistan Regional Government, or KRG, despite Baghdad's threats to expel it from a contract in southern Iraq. Exxon signed a deal to develop six blocks with the KRG, which is feuding with the Arab-dominated central government over land and oil rights.

Last year, U.S. oil company Chevron Corp., CVX -0.37% France's Total SA FP.FR +0.34% and the oil-producing arm of Russia's Gazprom SIBN.RS -0.68% followed Exxon's lead by striking their own deals in Kurdistan. The KRG allows for production-sharing arrangements, which are more profitable for oil companies than the service contracts Baghdad offers.

The KRG and the federal government are at loggerheads over scores of oil deals that the Kurds signed with international oil companies. Baghdad believes that these deals are null and void because they haven't approved by the central government, while the KRG argues that they are in line with the new constitution.