Iraqi energy officials on Sunday signed an oil exploration deal with a Kuwait-led group, finalising a deal that was altered to expel a Turkish firm amid worsening ties with Ankara.

A contract was inked with Kuwait Energy and Dragon Oil of the United Arab Emirates to explore a 900-square-kilometre (350-square-mile) block thought to contain oil in south Iraq, near the country's border with Iran.

The contract was signed by Abdul Mehdi al-Amidi, the Iraqi oil ministry's head of contracts and licensing, a representative of the state-owned South Oil Company, Hussein al-Mosawy of Kuwait Energy and Mark Sawyer of Dragon Oil, according to an AFP journalist present.

Kuwait Energy has a 70 percent stake in the project, with Dragon Oil holding the remainder. The companies have agreed to be paid a service fee of $6.24 per barrel of oil equivalent eventually extracted.

It is one of several agreements between Baghdad and foreign energy firms to boost oil output and explore for new deposits of energy as Iraq looks to cement its role as a key global supplier.

The original consortium that won the contract had included Turkey's TPAO, but officials announced in November that the Turkish firm would be expelled due to "non-technical issues", one of several signs of worsening ties between Baghdad and Ankara.

The two countries have been at odds over the Syrian conflict and Iraq has publicly urged Turkey to hand over fugitive Vice President Tareq al-Hashemi, who has been sentenced to death in Baghdad on charges of running a death squad.

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 largest in the world.

Baghdad repeats Exxon ultimatum: Kurdistan or south Iraq
Baghdad (AFP) Jan 27, 2013 - The Iraqi oil minister on Sunday reiterated an ultimatum to US energy giant ExxonMobil: to choose between working in southern Iraq and a controversial exploration deal with the autonomous Kurdish region.

Abdelkarim al-Luaybi said there was no formal time-limit for the American firm to make a decision, but told reporters in Baghdad that he expected one within the coming days.

"The decision is now ExxonMobil's to choose," Luaybi said. "Of course, it cannot go on with the two contracts. Thus, it must choose either to cooperate in the south of Iraq or in Kurdistan."

Luaybi's remarks came after Kurdish officials voiced confidence that Exxon would stick to the exploration deal it signed in October 2011 with the autonomous region in northern Iraq.

The contract angered Baghdad which regards deals signed by Iraqi Kurdistan to be illegal because they are not approved by the federal oil ministry.

Exxon and Anglo-Dutch giant Shell had completed a deal in January 2010 to develop production at West Qurna-1, an oilfield in southern Iraq.

But late last year, the US firm informed Baghdad that it wanted to sell its stake in the project, indicating it would focus on the controversial Kurdish deal.

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.