According to a report from Reuters, Spain's Repsol is the latest large international oil company (IOC) to consider potential investments in the semi-autonomous Kurdish region of Iraq.
Repsol's move, which risks it being blacklisted from investment in the rest of Iraq, follows recent investments in Kurdistan by U.S.-based Marathon Oil and Murphy Oil.
Repsol has investigated a number of potential blocks for investment, the sources said. It could buy a stake in a field already being explored by another company or it could acquire a new block from the Kurdistan Regional Government (KRG).
Kurdistan, which achieved a form of self-government after the first gulf war, began issuing oil licenses shortly after Saddam Hussein was toppled, initially attracting investments from only small explorers.
The KRG says its contracts are in compliance with Iraq's constitution but Baghdad has described them as illegal, and excluded oil companies which invested in the region from bidding for contracts in the rest of Iraq.
Although the south offers larger prospects than Kurdistan, tough competition from big international companies and stringent contract terms have deterred some investors.
Kurdish leaders are currently in talks with Prime Minister Nouri al-Maliki about forming a new government that would be led by Maliki, and recognition of oil contracts are one of their key demands.
A Repsol spokesman declined to confirm to Reuters that it is considering activities in Kurdistan, but added:
"We are expanding our footprint in various parts of the world to reduce our dependence on [Latin America]".