Iraq and Russian state oil producer OAO Gazprom Neft (SIBN.RS) have awarded an $879 million contract to South Korea 's Samsung Group (SSN.YY) to develop the Badra oil field in eastern Iraq , the Iraqi government said in a statement Tuesday.

A Gazprom company official said that Samsung would design and build phase two of a central processing facility, or CPF, for oil production in the field.

The official said initial production from the field is expected to be 15,000 barrels a day at the end of September this year. The company official told Dow Jones Newswires that work on the CPF is expected to take two years to complete.

Iraqi oil ministry officials weren't available to comment further on the project.

The Gazprom consortium, which includes South Korea 's Gas Corp. (036460.SE), Turkish Petroleum Corp. or TPAO, and Malaysia 's Petronas, plans to increase production from the field to 170,000 barrels a day by 2017, according to a development plan agreed with the Iraqi government.

Badra's reserves are estimated to be around 3 billion barrels of oil.

Gazprom, which owns the largest stake in the consortium at 40%, signed a contract with Baghdad to develop the field in January 2009. The state-owned Russian gas giant angered Baghdad last year when it signed a contract with the semi-autonomous region of Kurdistan in northern Iraq . Baghdad has asked Gazprom to choose between its contract in Kurdistan and the Badra oil field.

The central government in Baghdad is at logger heads with the Kurdistan region over scores of oil deals signed by the Kurdistan Regional Government with foreign firms. Baghdad argues that these deals are void because they haven't been approved by the central government, while the KRG maintains these deals are in line with the new Iraqi constitution.

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