The Iraqi Oil Ministry signed a final service contract for Dragon Oil and Kuwait Energy to work in Block 9, a 347-square-mile site in southern Basra.
The companies said they're eligible for a 20-year development project should Block 9 find commercial reserves during a five-year exploration period. Neither party gave a reserve expectation.
"We look forward to continue participating in the development of Iraq's energy resources, and supporting the country's endeavors toward the development of its energy sector," said Kuwait Energy Chief Executive Officer Sara Akbar in a statement.
Disputes between the central government in Baghdad and the semiautonomous Kurdish government of northern Iraq have plagued the country's oil sector.
In its report for January, the Organization of Petroleum Exporting Countries said Iraq was among members who saw oil production decline.