UPDATE 4-Exxon-led group clinches Iraq's W.Qurna contract

* Exxon consortium beats three groups for West Qurna

* W.Qurna a prized oilfield with 8.7 bln bbls of reserves

* Exxon 2.325 mln bpd output target beats rival targets (Adds statement from Exxon)

By Ahmed Rasheed and Muhanad Mohammed

BAGHDAD, Nov 5 (Reuters) - An Exxon Mobil-led consortium has beaten rival Russian, French and Chinese groups to secure initial rights to develop Iraq's West Qurna field, adding momentum to Iraq's bid to unlock its oil riches.

With reserves of 8.7 billion barrels, West Qurna is among the prized Iraqi fields eyed by Western oil majors as they face flat or lower output at home and stiff competition from Chinese and Indian oil companies in bidding for oilfields elsewhere.

"The consortium led by Exxon Mobil, which includes Shell, won the contract to develop West Qurna Phase One oilfield," Oil Ministry spokesman Asim Jihad said.

The initial deal was signed in Baghdad on Thursday but needs cabinet approval before it can be finalised.

The 20-year contract is part of a raft of deals Iraq is close to formalising in a bid to catapult itself to the world's No. 3 oil producer after decades of war and economic decline.

There is no guarantee that Iraq's next government, elected in a January vote, will honour the deals, but it injects optimism into prospects for Iraq's battered oil sector and a second oil bid round in December after a lacklustre June auction.

"We have agreed with the Ministry of Oil on the principles of the rehabilitation and development of the West Qurna field and look forward to completing the contract," Exxon said in a statement.

Exxon (XOM.N), partnering with Royal Dutch Shell (RDSa.L), beat Russia's LUKOIL (LKOH.MM) -- which had teamed up with No. 3 U.S. oil major ConocoPhillips (COP.N) -- and two other groups led by France's Total (TOTF.PA) and China's CNPC.

CONVENIENT TIMING

Exxon's output target for West Qurna Phase One beat out those of its rivals and allowed it to clinch the contract, said an Iraqi oil official, who was part of the negotiating team.

"This is better for us," the Iraqi oil official said. "We need higher production. This is a supergiant field and it has the capacity to produce even more than the target set by Exxon."

The group plans to raise the field's output nearly five-fold to 2.325 million barrels per day (bpd) from less than 500,000 bpd at present, said Iraqi Oil Minister Hussain al-Shahristani.