(Adds Iraq export agreement with Indonesia)

By Raheem Salman

BAGHDAD, March 14 (Reuters) - Indonesia's state-owned oil and gas firm Pertamina PERTM.UL is in talks to buy 10-20 percent of Exxon Mobil's XOM.N stake in Iraq's West Qurna-1 oilfield, Indonesia's Chief Economic Minister said on Thursday.

The development of the $50 billion West Qurna-1 project has been in question since last year, when Exxon offered to sell its stake after contracts it signed with the autonomous Kurdistan region riled Baghdad, which rejects them as illegal.

Indonesian minister Hatta Rajasa confirmed that Pertamina is interested in buying into the project. It has begun negotiations for a possible 10 to 20 percent stake, he said at a news conference in Baghdad.

Sources have said Exxon is considering selling part of its 60 percent stake in West Qurna-1 to PetroChina 0857.HK

601857.SS , the listed arm of China National Petroleum Corp (CNPC). ID:nL4N0BX1QH

Iraqi Prime Minister Nuri al-Maliki has offered Exxon sweeter contract terms to keep it operating in the south, on condition that the U.S. oil giant gives up its Kurdish deals, industry sources say.

Thursday's news conference also confirmed the signing of a memorandum of understanding that Iraq is to supply Indonesia with 35,000 barrels of oil per day.

(Writing by Isabel Coles; Editing by David Goodman)

((isabel.coles@thomsonreuters.com)(+964 790 191 7024)(Reuters Messaging: isabel.coles.thomsonreuters.com@reuters.net))

Keywords: PERTAMINA IRAQ/