ERBIL, Kurdistan Region – Iraq started drilling the first oil well in the Huwaiza oil field in southeastern Iraq. The oil ministry believes it may contain at least 1 billion barrels in reserves.

Iraq’s Oil Minister Jabbar al-Luaibi announced today that they began drilling the first well at the Huwaiza oil field in the town Halfaya near the Iranian border.

Iraq seeks to increase its oil production from 4.7 million barrels per day (bpd) currently to 5 million bpd by the end of this year, according to Reuters.

The Halfaya project will be operated by PetroChina and aims to increase its capacity to 400,000 bpd by 2018, according to the ministry.

Huwaiza oil field is being developed by Iraq’s state-run Maysan Oil Company which oversees the oil and natural gas industry in Maysan province in southeastern Iraq.

Iraq is the second largest oil producer, following Saudi Arabia, out of 14 oil producing members of the Organization of the Petroleum Exporting Countries (OPEC).

OPEC member states agreed in May to continue cutting oil outputs for another nine months in what is seen as a bid to increase global prices.

Iraq and Iran posed the main obstacles to OPEC in reaching a deal for its last output cutting decision in December. Iran insisted that they needed to raise their output since Western sanctions had been lifted and Iraq had just begun increasing its production after years of stagnation.

With the December deal, Iraq had agreed to cut output for the first half of 2017 while Iran was allowed a slight increase in production.

Oil funds up to 95 percent of the country’s budget. The central government in stopped paying the Kurdistan Region its 17 percent of the budget share in 2014.