Iraq and Italy's largest oil production company, the Eni SpA (E) group, are close to reaching a deal to cut the final production target for the giant Zubair oil field in southern Iraq to between 850,000 and 1 million barrels a day, an Iraqi oil industry official familiar with the matter said Thursday.

Officials from Eni , Iraq 's state-run South Oil Co. and the oil ministry have been in talks for the past few months to lower the target of 1.25 million barrels a day, which they agreed to in 2009 when they signed the contract.

If they reach an agreement on new target production level, it would be the second reached with international oil companies working in southern Iraq , following January's deal with OAO Lukoil Holdings (LKOH.RS) when the target for the supergiant West Qurna-2 was reduced to 1.2 million barrels a day instead of the earlier agreed 1.8 million barrels a day.

Eni wasn't immediately available to comment.

Oil majors BP PLC (BP) and Royal Dutch Shell PLC (RDSA) are also believed to be pursuing talks with the Iraqi oil ministry to reduce final production targets of Rumaila and West Qurna-1 respectively.

Logistical bottlenecks, weak infrastructure, including lack of water injection systems, and delays in approving subcontracts by the government have eroded investors' enthusiasm at the same time that the semi-autonomous region in the north has attracted international oil companies.

Large oil companies such as U.S. giants Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX), Total SA (TOT) of France and Russia's Gazprom Neft have signed deals with the Kurdistan Regional Government, or KRG, seeking greater profits than those on offer elsewhere in the country despite Baghdad's warning that they would lose their deals in the south.

Their move has inflamed long-simmering tensions between the semi-autonomous region of Kurdistan in northern Iraq and the central government. Baghdad considers these deals null and void because they need to be approved by the federal government first, while the Kurds argue that they are in line with the new constitution.

Iraq 's Kurdistan is thought to have fewer oil resources than southern Iraq , but security and infrastructure in the Kurdish region is the main driving factor attracting those companies.

Kurdistan has suspended since December exports of more than 100,000 barrels a day over a payment row with Baghdad , saying the central government had failed to reimburse development costs to companies developing oil in the Kurdish region.
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