Iraq expects output from its southern oilfields to hit up to 2.5 million barrels per day at the end of this year despite crumbling infrastructure, the head of South Oil Company (SOC) said.

Its offshore terminals are stretched to capacity and dilapidated and its export pipeline to Turkey suffers frequent maintenance problems and is often bombed.

'We don't deny that much of the oil infrastructure is old and it cannot work for long periods at maximum capacity,' Dhiya Jaffar said in an interview on Saturday.

'If Iraq does not move fast to increase its export capacity we will face a problem, a big problem. It is at choking point.'

Iraq will need to invest billions of dollars in storage tanks, export terminals and pipelines after years of war, economic sanctions and decline. It is already short of cash and is grappling with a deficit.

One problem was the onshore export line between southern oil locations and Al Fao port, which may affect Iraq's daily export plan, but not its monthly export schedule.

Output from Basra, Rumaila, West Qurna Phase One, Zubair and Majnoon - all being developed by international companies - in addition to smaller fields developed by Iraq alone, was around 1.920 million bpd.

Production from Rumaila, developed by British oil major BP and China's CNPC, fell slightly earlier this year due to damage in some tanks and pipelines. Output was at 1.130 million bpd, Jaffar said.

Work to replace the damaged facilities would be completed by next month, he said. 'Our oil infrastructure is not running fully due to the lack of maintenance and the circumstances that Iraq went through,' he added.

'Now what is needed is to conduct maintenance work and replace some facilities, but this is not related to problems in executing the development plan for the field.'

BP said in January production increased by more than 10 percent above the 1.066 million bpd baseline rate agreed in December 2009.

Output from Rumaila reached 1.29 million bpd on Jan. 11, but it has fluctuated since then, according to official figures in March.-Reuters