"The two companies will invest 50 billion dollars in the project," Oil Minister Hussein al-Shahristani, told reporters.

The 20 year-contract is expected to boost production at the Rumaila field from the current one million barrels per day to around 2.8 million bpd within its first six years, the minister said.

Rumaila is already integral to Iraq's oil output, contributing almost half of the nation's current production of around 2.5 million bpd, and is estimated to hold further reserves of 17.7 billion barrels.

In return for their enormous investment, BP and CNPC have agreed to accept payment of two dollars per additional barrel produced at Rumaila.

"We have shown we can attract international companies to invest in Iraq and to boost production through service contracts," Shahristani said.

"They will not have a share of Iraqi oil and our country will have total control over production. Work begins tomorrow (Wednesday)," he said.

The two companies will operate through a joint venture in which Iraq's State Oil Marketing Organisation (SOMO) will have 25 percent, BP 38 percent and CNPC 37 percent.

Shahristani said development of the oil field will cost 25 billion dollars and the other 25 billion will be the operating costs.

BP chief executive Tony Hayward said: "We expect to invest around 15 billion dollars. It's a very significant undertaking for BP.

"We are going to focus on building the capacity and capabilities in Iraq, in the Iraqi oil industry for the benefit of Iraq and the people of Iraq. We are looking forward for the begining of long and mutual relationship," he said.

Jiang Jemin, CEO of CNPC, said the three shareholders have "reached a common understanding on mutual efforts to reach the (targeted) level of production ahead of schedule."

Iraq has the world's third largest proven oil reserves of 115 billion barrels, behind only Saudi Arabia and Iran.

However, there has been little exploration or development of fields in the past three decades because of wars and the international embargo imposed on Iraq in 1990 following Saddam Hussein's invasion of Kuwait.

Income from oil sales, especially earnings from exports of around two million barrels a day, provides some 85 percent of Iraqi government revenues.

Investment in the country's ageing energy infrastructure has been hampered by delays to a key hydrocarbons law which would regulate the oil sector and divide responsibility between the central government and Iraq's provinces

On Monday, a consortium led by Italian energy giant ENI initialled a contract with the Iraqi government to explore the smaller Zubair oilfield in southern Iraq, an oil ministry spokesman said.

The field produces around 195,000 bpd, according to ENI which expects production to increase to 1.13 million bpd by 2016 through the deal, which awaits approval by the Iraqi cabinet.

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