Iraq's Oil Ministry said on Thursday it had signed a deal with Britain's BP and China's CNPC  to develop its super-giant Rumaila oilfield, a milestone in Iraq's efforts to renew its struggling oil sector.

'The signed contract will be referred to the cabinet for approval, after which the Oil Ministry will hold a ceremony to announce the beginning of work by the two companies,' Oil Ministry spokesman Asim Jihad said.

Jihad said the deal was signed by ministry officials represented by Iraq's South Oil Company and officials from CNPC and BP.

The service contract for Rumaila was the only deal which emerged from the ministry's first oilfield auction in June, a centrepiece of its strategy to bring new life to a sector rich in reserves but in desperate of foreign cash to overhaul dilapidated facilities and out of date practices.

While most oil firms at the auction balked at Iraq's stiff payment terms, BP and CNPC cut their proposed remuneration fee to $2 per barrel and won the Rumaila contract.

BP holds a 38-percent stake in the venture, while CNPC has a 37-percent share. Iraq's State Oil Marketing Organisation controls the rest.

Rumaila is the workhorse of Iraq's oil industry today, with a current capacity of 1.1 million barrels per day (BPD), almost half Iraq's total output of 2.4 million bpd.

BP and CNPC aim to boost output to 2.85 million barrels per day as a plateau target over the life of the 20-year contract.

The ministry will offer 10 other oilfields in a second bidding round that will conclude in early December. – Reuters