UPDATE 1-Talks continue for Iraq oil service deal-BP exec

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By Simon Webb

DUBAI, Aug 20 (Reuters) - Talks between Iraq and BP (BP.L: Quote, Profile, Research, Stock Buzz) are ongoing for a short-term oil service contract, a senior BP executive said on Wednesday, after a U.S. diplomat in Baghdad cast doubt on such deals earlier this week.

Iraq and major international oil companies have been negotiating six short-term technical service contracts, each worth about $500 million and targeting a 100,000 bpd increase in output from six of Iraq's biggest oilfields.

"As far as we are concerned, negotiations continue over the technical service contract," Steve Peacock, president of BP's Middle East and South Asia exploration and production unit, told Reuters.

He declined to give further details.

The coordinator for Iraq's economic transition at the U.S. embassy in Baghdad, Charles Ries, said on Sunday that Iraq's government may drop all of the contracts.

Iraq had aimed to sign the deals in June, but disagreement over payment terms and other issues have delayed them.

Baghdad asked the companies involved to revise their proposals and shorten the contracts to around 12 months to 18 months in July as talks dragged on.

The Iraqi oil ministry wants to sign longer-term contracts to develop its giant fields by the middle of next year, and wants to avoid much overlap between the different deals.

The other companies involved in negotiations are Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz); Shell in partnership with BHP Billiton (BHP.AX: Quote, Profile, Research, Stock Buzz); Exxon Mobil (XOM.N: Quote, Profile, Research, Stock Buzz); Chevron (CVX.N: Quote, Profile, Research, Stock Buzz) with Total (TOTF.PA: Quote, Profile, Research, Stock Buzz) and a consortium of smaller firms Anadkaro (APC.N: Quote, Profile, Research, Stock Buzz), Vitol and Dome.

Anadarko has already dropped its plans, as it found the terms unattractive, an industry source said.

The oil companies, jostling for years to position themselves for access to the world's third-largest oil reserves, had hoped that the contracts would give them a headstart in negotiations for future deals.

But Iraq has refused to link the short-term deals to any longer-term contracts on the same fields.

The contracts have also attracted criticism at home and abroad due to the lack of transparency in choosing the companies. There was no bidding round.

Iraq's dilapidated energy sector needs huge investment after years of sanctions and war. The country exports about 2 million bpd of oil. (Reporting by Simon Webb; editing by James Jukwey)