David Horgan, managing director of Petrel Resources, said the exploration and production deal will give the firm "a net production interest in Block 6 of 25 to 35 percent."

"It now looks like the existing hydrocarbon laws will be used with PSA agreements in Southern Iraq," he told the British-based investment news site Proactive Investors. "Any new contracts will include local infrastructure and possibly paying some revenues to local charities."

Petrel predicts 5 billion barrels of oil are to be found in the block.

Iraq's Oil Ministry is relying on a Saddam-era oil law to move forward with its oil sector as a draft hydrocarbons law is stalled in Parliament. The earlier law gives Iraq's Oil Ministry rights to sign deals, though risk contracts like PSAs would likely need Parliamentary approval.

Baghdad is in negotiations with a handful of the world's largest firms to increase production in currently producing fields under new Technical Support Agreements. It is also starting a tendering process for other fields, but so far has said this first round of bids will not include exploration agreements.

Petrel, however, is one of a group of companies that signed its deal with Saddam. Iraq's Oil Ministry said it will renegotiate such contracts under a new legal regime, recognizing their validity. Since Saddam's overthrow, Petrel expanded its Iraq presence.

It received a one-year extension on its agreement to provide training and technology to Iraq's Oil Ministry for the Marjan oil field, is also moving forward on a project to help engineer, procure equipment and supervise construction of the Subba & Luhais fields' expected oil and natural gas production, and has registered for the upcoming bidding round.

The draft oil law remains stuck as Iraq's Kurdistan Regional Government and Baghdad differ on how decentralized control over the oil should be.

PSAs themselves are controversial. They are highly favored by international oil companies that are reimbursed for all costs and then get a cut of the oil itself, as well as able to claim the reserves when reporting to Wall Street. Iraq's oil sector is nationalized and Iraq's unions, among others, don't want international oil companies to have the footprint in Iraq PSAs would offer.

Iraq's oil fields have excellent find rates for exploration, and the oil is easy to produce and of high quality.

"We expect to be invited soon to discuss Block 6," Horgan said, adding the block has shown to have easy to reach oil. "If we sign by summer we will deploy a seismic crew over the winter 2008/9, allowing a well the following winter."