BP expects to sign an initial deal in early September to revive Iraq's northern Kirkuk oilfield, a move that could affect regional politics because the field straddles the border with the autonomous Kurdish region, a report Wednesday said.

A deal at Kirkuk would allow the British major - already at work at Iraq's biggest producer, Rumaila, in southern Iraq - to negotiate access to significant reserves in the north. Baghdad would get a trusted, experienced partner to help arrest a huge decline in output from Kirkuk, Reuters reported.

"It's an initial 18-month deal to offer support, which will provide an opportunity for BP to negotiate a longer-term development contract," a source familiar with the negotiations told the news wire.

BP declined to comment to Reuters.

The company would work on the Baghdad-administered side of the border on the Baba and Avana geological formations. Kirkuk's third formation, Khurmala, is controlled by the Kurdistan Regional Government (KRG) and being developed by the Iraqi Kurdish KAR group.

BP's involvement at Kirkuk has been under negotiation for more than a year. When Baghdad first revealed the preliminary arrangement in January, the KRG rejected the pact as illegal, because it had not been consulted.

The UK major is comfortable with its decision to proceed, the source said.

"BP expects some noise from the KRG, but it's confident the government in Baghdad has a sensible way forward over Kirkuk."

Among the world's international oil companies, BP could have the best relationship with Baghdad through its contract at the huge, $30 billion Rumaila oilfield project.

Baghdad hopes BP will eventually sign a technical service contract at Kirkuk like the one for Rumaila, an Iraqi oil source said. The company expects, however, to negotiate better commercial terms for this contract, the industry source said.