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* Kurdistan has already rejected the deal as illegal
* Says no firm will be allowed to work in disputed areas
* BP spokesman says company happy with the agreement
By Meeyoung Cho and Peg Mackey
SEOUL/LONDON, Sept 11 (Reuters) - Baghdad signed a deal inearly September for BP to revive Iraq's northern Kirkukoilfield, Oil Minister Abdul Kareem Luaibi said on Wednesday,confirming a plan that Kurdistan has already rejected asillegal.
The agreement allows the British oil major - which alreadyoperates Iraq's biggest oilfield, Rumaila - to negotiate accessto significant reserves in the north in return for helpingBaghdad arrest a huge decline in output from Kirkuk.
"We signed a letter of intent about 10 days ago," Luaibitold Reuters on the sidelines of an energy ministers' meeting inKorea.
Reuters reported at the end of August that BP would work onthe Baghdad-administered side of the border with Kurdistan,while the Iraqi Kurdish KAR group is developing a formationunder the control of the Kurdistan Regional Government (KRG).
"We are pleased with this agreement," a BP spokesman said.
The deal faces opposition from the KRG, however, whichrejected the planned pact as illegal when Baghdad revealed thepreliminary arrangement with BP in January.
"The KRG's position on this issue remains unchanged," aspokesman from the KRG's Ministry of Natural Resources said onWednesday in response to the BP deal.
"No company will be permitted to work in any part of thedisputed territories including Kirkuk without formal approvaland involvement of the KRG."
Re-developing Kirkuk is part of a wider push by Baghdad torescue Iraq's oil sector from decades of war and neglect.
Oil provides the lion's share of Iraq's government revenuesand foreign exchange earnings and the authorities have set aproduction target of 3.4 million barrels per day (bpd) forend-2013.
The increasingly influential OPEC member is currentlyproducing 3.25 million bpd, Luaibi told reporters ahead of anAsian oil ministers meeting in Seoul.
Iraq hopes to add 175,000 bpd of capacity later this monthwith the start up of the Royal Dutch Shell-operated Majnoonfield.
Luaibi said Majnoon was expected to start a 10-day testproduction phase on Sept. 20, after which the field was expectedto ramp up towards full production.
Work since 2010 at Iraq's southern oilfields by the likes ofBP, Exxon Mobil and Eni raised output by600,000 bpd to 2.9 million bpd in 2012, turning Iraq into theworld's fastest growing exporter.
Iraq is currently exporting 2.5 million bpd, said Luaibi,compared to an average of 2.58 million bpd in August.
Commenting on global oil prices, the Iraqi oil minister saidabout $100 per barrel was fair for consumers. Brent oil was at $111.62 at 1115 GMT.
