* Move seen paving way for projects in northern Iraq
* TPIC capital to be increased to $500 million
* Turkey, Iraqi Kurdistan building ties amid Baghdad tension
By Orhan Coskun
ANKARA, Jan 22 (Reuters) - Turkey will increase the capital of the state Turkish Petroleum International Company (TPIC) and transfer its ownership to state energy company BOTAS in a move seen boosting foreign activities, particularly in northern Iraq.
The cabinet agreed to increase TPIC's capital to $500 million from $150 million and transfer its ownership from state oil company TPAO, Turkey's Official Gazette said on Tuesday.
Analysts said BOTAS' established name abroad and its experience in energy projects would increase the ability of TPIC, which has authority for foreign exploration and production of oil, to participate in projects abroad.
Ankara has been building on its trade and economic ties with Iraqi Kurdistan at a time of growing tensions with the central government in Baghdad.
In November, industry sources said an unnamed new Turkish oil company was in negotiations to acquire several blocks in Iraqi Kurdistan in a joint venture with at least one foreign oil major and the Kurdistan Regional Government.
Autonomous Iraqi Kurdistan has already signed deals with oil majors like Exxon Mobil and Total, defying the central government in Baghdad which says only it has the right to sign contracts for Iraq's oil resources.
Kurdistan says its right to sign oil deals is enshrined in the constitution. But Baghdad says those agreements are illegal and has warned companies they will be blacklisted from Iraq oil opportunities if they sign accords with Kurdistan.
Oil majors see better terms, security and an easier working environment in Kurdistan compared with tougher service contracts and difficulties with red tape, bureaucracy, and infrastructure bottlenecks that hit oil projects in the rest of Iraq.
Turkey's TPAO operates in southern Iraq but does not have any official operations in Kurdistan.
Political tensions between Baghdad and Ankara have been running high after Turkey accused Iraqi Prime Minister Nuri al-Maliki of sidelining Sunni Muslims in Iraq since the onset of a political crisis after U.S. troops left in December 2011.
The TPIC capital increase will be paid for from TPAO's shareholders' equity in a cash lump sum.