* Local official says oil sites "completely safe"
* Southern oilfields far from Islamic State militants
* Iraqi forces arrest residents, confiscate weapons (Adds details, context)
By Aref Mohammed
BASRA, Iraq, Jan 15 (Reuters) - Iraq has sent an armouredarmy division and a police strike force into the southern oilcity of Basra to disarm residents amid intensified feuding amongrival Shi'ite Muslim tribes, local officials and securitysources said on Friday.
Forces had been deployed earlier to restore calm to ruralareas running north of the city towards West Qurna and Majnoonoilfields on Wednesday, but a local official reassured foreigncompanies their assets were secure.
"The oil companies and oil sites and the roads leading tothem are completely safe. There are no concerns in this regard,"said Sabah al-Bazouni, head of Basra's provincial council.
The tribal fighting and military response are a sign of thegrowing problems that could face foreign oil companies, eventhough they operate far from areas of conflict with IslamicState.
The disputes have forced Baghdad to divert critical securityresources from the frontlines with those militants in the northand west to the south, where oil fields account for more than 85percent of production by the major OPEC member.
"This security operation targets areas north of Basra thathave an abundance of tribal clashes and will also includeneighbourhoods inside Basra city in the future," said Jabaral-Saadi, head of the security committee at the Basra provincialcouncil.
Prime Minister Haider al-Abadi held his weekly cabinetmeeting on Wednesday in Basra where he called on security forcesto "strike with an iron fist (against) the gangs that tamperwith Basra's security".
With tanks and heavy machine guns, the security forces entered overnight the northern Basra district of al-Hussein, aflashpoint for tribal fighting also known as al-Hayaniya, Saadisaid. Backed by army helicopters, they began raiding homes andseizing weapons, he added.
IRAQ'S ECONOMIC BACKBONE
Security forces arrested around 30 people on criminalcharges and seized machine guns, mortars, rocket-propelledgrenades, assault rifles and large ammunition caches, thesecurity sources said.
"Protecting security in Basra province, which is thecountry's economic backbone, has become a priority," saidBazouni, the provincial council head.
As the holder of the world's fifth-biggest crude reserves,oil makes up around 40 percent of Iraq's gross domestic productand more than 90 percent of fiscal and current externalreceipts.
But lower oil prices and costs associated with the fightagainst the insurgents have strained Baghdad's finances. The2016 budget forecasts oil at $45 a barrel and average exportsnationwide of 3.6 million barrels per day.
Oil exports from southern Iraq dropped last month to anaverage of 3.215 million bpd, down from a record high inNovember but up from a year earlier.
Abadi visited West Quena-2 oilfield in August to reassureits Russian operator Lukoil after officials warnedproduction could be affected by protesters demanding jobs.
The people of Basra complain that although the bulk ofIraq's oil is produced and shipped from their province, they donot enjoy the benefits. (Additional reporting by Saif Hameed; Writing by Stephen Kalin;Editing by Ralph Boulton)
