BAGHDAD - Tehran wants to solve by diplomatic means a dispute with Baghdad over accusations that Iranian troops seized an oil well inside Iraq, a spokesman at the Iranian embassy said on Saturday.

Iran's ambassador to Baghdad Hassan Kazemi-Qomi met Iraqi government officials to discuss Baghdad's charges of an incursion by 11 Iranian soldiers who had taken over the well in a disputed border area, the spokesman said.

However, the ambassador reiterated Iran's denial of the Iraqi charges at the meeting on Friday.

The ambassador had told the Iraqi side that a joint committee including oil and military officials from both countries was responsible for settling such problems.

We will resolve this issue in a diplomatic fashion, the spokesman said on condition of anonymity.

World oil prices rose on Friday on the report about the commandeered well at Fakka oilfield in Maysan province. Border disputes between the two countries continue to rankle more than two decades after they ended an eight-year war in which an estimated 1 million people died.

Iraqi officials declined comment on Saturday about whether they believed the Iranian troops were still inside Iraq.

Fakka is a modest oilfield by Iraqi standards, currently producing around 10,000 barrels per day.

But development of the field is part of Iraq's plan to more than quadruple the nation's production capacity to 12 million barrels per day in six or seven years, turning it into a leading world energy producer.

The Oil Ministry offered a contract to develop Fakka and nearby fields in an auction in June, its first since Saddam Hussein was overthrown, but foreign firms declined Baghdad's terms.
Iraqi officials held an emergency security meeting on Friday evening, accusing Iran of a violation of Iraqi sovereignty and demanding immediate withdrawal.

At the same time, the Iraqi government sought to avoid lasting damage to its complex, delicate relationship with Iran, a fellow Shi'ite Muslim majority nation and regional power that has long opposed the U.S. military presence in Iraq.

The U.S. military has declined comment on the Fakka report.

Iraqi oil officials said Iranian soldiers had temporarily occupied the oil well in a remote desert area several times over the past year, calling it a deliberate provocation. (Reporting by Muhanad Mohammed; writing by Missy Ryan; editing by David Stamp)