Iraqi officials have agreed a final draft of a law that sets rules for sharing Iraq’s oil wealth and aims to bring in billions of dollars of foreign investment to rebuild the mainstay of the economy.

But crucially, international oil firms waiting for access to the world’s third biggest oil reserves will find little detail in the draft about the form future deals will take. They are likely to hold off major commitments until there is clarity. The draft calls for a federal committee headed by the prime minister to oversee future contracts and review deals signed under Saddam Hussein or by the Kurdish regional government, oil ministry spokesman Asim Jihad said.

Passing an oil law to help settle potentially explosive disputes among Iraq’s ethnic and sectarian communities over the division of oil reserves has been a key demand of the United States in providing further military support to the government.

Iraq’s Oil Committee of senior national and regional leaders has been drawing and redrawing the document for months and missed its own deadline of finalising it by the end of 2006.

The Oil Committee, headed by Deputy Prime Minister Barham Salih, will send the draft to cabinet next week for approval. After that it will go to parliament. Officials hope that the broad base of the negotiating team means it will pass easily. The final draft was in line with earlier versions described last month after a previous round of talks.

A national oil company will be set up to develop production and exports and the law is intended to ensure development of the oil industry across Iraq’s regions, Jihad said. It establishes a mechanism for centralising oil revenues and distributing them to the regions. Jihad refused to say who will negotiate with the international firms but explained a federal council will have the final word on approving the contracts.

The division of oil is a key factor in communal tensions in Iraq. The southern oil fields around Basra lie in territory controlled by competing factions of the dominant Shi’ite Islamist political forces, The northern fields lie on the edge of Iraqi Kurdistan around the city of Kirkuk. Kurds want to annexe the city as their regional capital. The Sunni minority is concentrated in Baghdad and regions immediately to the north and west where there are few known hydrocarbon reserves.