Iraq's Oil Ministry is studying an offer submitted by a private Saudi company to rebuild the idled Iraq Saudi oil export pipeline, ministry spokesman Asim Jihad told Reuters on Sunday.

Jihad and a representative of the Saudi firm, Ali Mahir, said the offer proposed involving Japan's Mitsubishi and a Hungarian company identified as OTV, which took part in the construction of the original 626 km (390 mile) pipeline.

Jihad said: "We welcome any cooperation with Saudi Arabia in the oil sector to enhance bilateral relations. The offer is under discussion."

OPEC member Iraq first started oil exports through the 1.7 million barrels per day pipeline in 1989, but the Saudis shut it off the following year after the start of the Gulf War. It has remained closed since then.

Asim Jihad said Iraq was keen to find new export outlets to cope with the expected rise in production after signing 11 deals with foreign companies.

Jihad told Reuters: "Companies developing Iraqi oilfields will considerably raise production in coming years and that requires preparing more export outlets for oil."

A representative for the private Saudi company, Ali Mahir, said the firm would seek the Saudi government's approval for the deal.

Saudi Arabia and Iraq agreed to resume diplomatic relations, which had been severed following the 1990 Iraqi invasion of Kuwait, after the fall of Sunni dictator Saddam Hussein in 2003. But ties have been frosty as Riyadh has had trouble adjusting to the emergence of a Shi'ite led government in Iraq.

The OPEC member is in desperate need for billions to rebuild its battered economy and crumbling infrastructure.

It signed a series of development contracts with global oil companies after two bidding rounds last year in a bid to boost it crude production potential to Saudi Arabia's levels of 12 million barrels per day (bpd) from around 2.5 million bpd now.

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