* Former BP boss to leave in second half of 2017 - sources
* Hayward short listed several candidates to succeed
* Company struggling to recover after oil rout, Iraq conflict
* Genel suffered heavy blow after huge reserves downgrade
By Ron Bousso
LONDON, Sept 29 (Reuters) - Tony Hayward, the former BP boss, is set to step down next year as chairman of Genel Energy, which he founded in 2011 and became the biggest oil and gas producer in Iraqi Kurdistan, three sources close to the company said.
Today, Genel is struggling with a drop in oil prices, regional conflict and a large reserves downgrade.
The 59-year-old, whose tenure at BP ended abruptly following the deadly 2010 Deepwater Horizon Gulf of Mexico spill, has in recent weeks said in closed discussions he plans to quit his post in the second half of next year, the three sources said.
A company spokesman said that no decision has yet been made regarding the timing of such a transition.
"Genel is committed to having a strong board and, as you would expect, carefully considers succession planning in order to ensure a smooth transition of key roles at appropriate times," the company said.
Hayward, who is also the non-executive chairman of commodities giant Glencore, has short listed a number of candidates who could succeed him which "would have prominent standing in the City," one source said, referring to London's financial community.
He is expected to present his nominees to the board in the next few months.
Hayward, who drew heavy criticism over his handling of the Deepwater Horizon blowout and by stating "I want my life back," is expected to focus on his efforts to set up a new oil and gas exploration and production company focused on Latin America, the sources said.
Hayward may now have less than a year to revamp Genel after it posted its biggest loss ever last year and suffered a succession of setbacks which severely dented its reputation as one of the most attractive energy companies in the years following its listing in London in 2011 at the peak of the global commodities boom.
Genel shares are today at around 10 percent of their January 2014 peak, shortly before the start of the oil market rout.
After leaving BP in 2010, Hayward teamed up with financier Nat Rothschild to create investment vehicle Vallares which merged with Genel Energy in 2011. Hayward was named Genel chief executive with a mandate to expand operations in Kurdistan and Africa at a time of soaring oil prices.
A string of disappointing oil exploration campaigns in Malta, Angola and Morocco led to a $480 million write-off in early 2015.
Plummeting oil prices and escalating violence in Iraq and neighbouring Syria that led to large delays in payments for oil sales to the Kurdistan Regional Government also piled pressure on the company.
Genel's stature was reduced when earlier this year it announced the halving of the reserves estimate at its flagship Taq Taq field in Northern Iraq and a subsequent $1 billion write-off which led to its biggest-ever annual loss.
The company is now increasingly turning its focus to the Turkish gas market with the development of the Miran and Bina Bawi fields in Kurdistan Genel hopes to connect via pipeline to neighbouring Turkey.
In a sign of the shift in focus, Hayward stepped down as chief executive in July 2015 and was succeeded by Turkish national Murat Ozgul last year. (Editing by William Hardy)