PetroChina Co, China's largest oil explorer, may join with United States-based energy giant Exxon Mobil Corp to co-develop the West Qurna oilfield in Iraq, which would make the Chinese company the biggest single foreign investor in the Iraqi oil industry.

An industry source close to the company confirmed to China Daily that the two companies are holding talks, but added: "It is not a good time now to release the details of the ongoing talks."

The company has also been reported to be holding talks with Lukoil OAO Holdings, Russia's second-biggest oil producer, over joint development of the stalled West Qurna-2 project, which is now operated by Lukoil.

The West Qurna field has the potential to produce more than 5 million barrels of oil per day, enough to rival the Ghawar field in Saudi Arabia, the world's largest producing field.

The oilfield also plays a vital role in realizing Baghdad's ambitious plan to boost its oil production to 12 million barrels per day by 2017 from about 3 million bpd at present.

It was rumored last year that Exxon Mobil might sell its stake in the $50 billion project. Baghdad was displeased by the company's move to sign contracts with the semi-autonomous Kurdistan region, which is deemed illegal by the central government of Iraq.

However, the US oil giant later committed itself to further investment in the project.

If a deal materializes, it will not be the first instance of cooperation between the two huge energy players.

Exxon Mobil signed a separate deal with PetroChina last month to conduct a joint study of the Changdong tight gas block in the Ordos basin in northern China. The agreement was considered a big move by a foreign investor in China's unconventional gas sector.

Regarding a potential deal involving West Qurna-2, the source declined to give more information.

However, Lukoil Chief Executive Vagit Alekperov has said the company prefers an Asian player to replace Norwegian oil company Statoil ASA, which sold its 18.75 percent stake last year. West Qurna-2 is expected to produce 500,000 bpd in 2014.

Gao Jian, an oil analyst at Sublime China Information, a Chinese commodity consultancy, said the possible deal will increase the domestic crude supply (in Iraq) for a short period, because oil companies usually sell their products on overseas markets instead of transporting them back home.

"In the long run, it will be beneficial for the company's assets and revenue," he said. "However, (PetroChina) has to solve the first problem, which is to reach the production target set by the Iraqi government, before it can be in total charge of the resource."

According to the General Administration of Customs, China's dependency on energy imports has consistently risen.

Crude oil imports expanded 1.4 percent year-on-year to 164 million metric tons in the first seven months of 2013. Gasoline imports increased 6.6 percent to 24.85 million tons.

In 2007, the company won exploration rights to Iraq's southern oilfield, Ahdeb, for $3 billion. The next year, it joined with BP Plc to gain exploration rights to Rumaila, the biggest oilfield of Iraq, for $15 billion.

PetroChina is also the operator of the Halfaya field.

Iraq's oil industry has made a remarkable recovery since international oil majors returned to the war-torn country in 2009.

Iraq overtook Iran in 2012 to become the second-largest oil producer in the Organization of Petroleum Exporting Countries.