We will seek oil in 10 different places in northern Iraq in 'the Barzani region'

Kenan Veziroglu TPAO

Exploration work is expected to start in January in areas held by the KDP, a party led by Massoud Barzani, a close ally of Ankara.

Iraq, which runs oilfields near the town of Kirkuk just south of the Kurdish-held areas, has not made an official response to the plans.

But Baghdad has repeatedly condemned Turkey's military occupation of the Kurdish-controlled north and asked United Nations' secretary general Kofi Anan to press for a withdrawal.

Tension mounts

The news comes as speculation mounts that the US is preparing to intensify military strikes against Iraq, as part of its "war on terror", which would involve using Turkish bases that host US and British jets enforcing the no-fly zone.

Economically troubled Turkey has tried to boost ties with its embargo-hit southern neighbour which was once a major trading partner.

Approval to drill in northern Iraq was given by the UN sanctions committee in September under the "oil-for-food" program.

Similar contracts have been awarded to Russian oil firms Zarubezhneft and Tatneft.

TPAO, which produces 90% of Turkey's oil, has previously held talks with Iraqi on the exploitation and transportation of natural gas once US sanctions are lifted.

Turkish compensation

Turkey claims it has suffered losses of up to $40bn (�27.8bn) during the 10 years of UN sanctions imposed on Iraq.

In September, Turkey's BOTAS Petroleum Pipeline Corporation was awarded the largest compensation payment to date from the UN Compensation Commission for Iraq.

BOTAS had asked for $1.05bn (�730m) but only received $176.3m (�122.8m) for the shutdown of its oil pipeline from Iraq.

The UN Compensation Commission is due to announce its latest awards on Thursday.