* Draft law to give Baghdad more control over oil
* Kurds promise political battle
* Law would create Iraqi National Oil Co.
By Ahmed Rasheed
BAGHDAD, Sept 23 (Reuters) - Iraq's leadership has changed the draft of a long awaited oil and gas law in a way that would give central government more control over the country's vast crude reserves and provoke a clash with the semi-autonomous Kurdistan region.
The law, a copy of which was obtained by Reuters, would give Baghdad more power to manage and develop the OPEC member's petroleum resources, the world's fourth largest.
It alters a 2007 version agreed among political blocs that gave regional powers partial authority over their reserves.
The amendments are set to provoke a political fight between Prime Minister Nuri al-Maliki's government and the Kurds, who are part of his ruling coalition and wield considerable clout in the Iraqi legislature.
Iraq's Arab-dominated central government, led by Maliki, and the Kurdish region have for years disputed control of Kurdish fields. The row shut down exports from Iraqi Kurdistan from October 2009 to February of this year.
"We're still giving space to discussions to resolve this issue. We have not reached the moment of opening fire on Maliki's government," a senior Kurdish lawmaker told Reuters on condition of anonymity.
The amended law, approved by the cabinet in late August, has been sent to parliament for final passage, but the legislature's speaker Osama al-Nujaifi said talks to resolve the dispute could take a long time.
"The amended draft concentrates authority to sign oil deals in the hands of the central government and the oil ministry, while the Kurdish region sought more power in the process of signing contracts," Nujaifi told Reuters.
"The only way out of this issue is dialogue and discussions ... it will be very complicated," he said.
The amended law would give the oil ministry authority to hold bidding rounds for most oil and gas fields, leaving currently producing fields and discovered but undeveloped fields close to them in the hands of a newly created Iraqi National Oil Company (INOC).
The 2007 draft version restricted the ministry to auctions for discovered, undeveloped fields.
The changes could result in the inclusion of Kurdish fields in future auctions, which the Kurds say they will not accept.
"The amendments to the draft infringe on the constitution, which stipulates that the central government and regional authorities should jointly run oilfields," said Bayazed Hassan, a Kurdish MP and a member of parliament's energy panel.
Kurdish and central government officials are discussing the amended law at high levels, and the Kurds have made clear they could review their support for Maliki's government if a resolution is not found, officials said.
The new oil law has long been considered vital to securing foreign investment to boost Iraq's oil output, now at around 2.75 million barrels a day, and rebuild its shattered economy. International energy companies want a stable legal framework for oil and gas deals.
Iraqi officials have said petroleum resources belong to all sects and ethnicities in Iraq, and logically the central government should manage them. The Kurdish region and the provinces, particularly oil-rich Basra and Sunni-dominated Anbar, have argued for more local control.
"Enacting a new oil law is essential to develop Iraq's energy sector and we are seeking to have new legislation, away from political wrangling," Oil Ministry spokesman Asim Jihad said. "Any disputed details in the draft should be left for technical teams to resolve, not politicians."
The new draft calls for INOC to control coveted, already-producing oilfields -- Kirkuk's 2.3-billion-barrel Bai Hassan, and the 6-billion-barrel Nahr Bin Umar field in the south, for example.
The law would create a federal oil and gas council as the ultimate policy-setter. It would give the council power to approve policies proposed by the oil ministry, agree procedures for negotiating and contracting during bid rounds, and ratify drilling, development and production contracts.
Under the old version, the federal council could only draw up policy and issue instructions.
The new law eliminates a clause that required the council to have Shi'ite, Sunni and Kurdish representation, and adds a clause reserving a council seat for the deputy prime minister for energy -- now former Oil Minister Hussain al-Shahristani.
Kurdish officials see Shahristani as a major obstacle in the tense relationship between Baghdad and Kurdistan on energy issues. He has called for oil contracts signed by the Kurds to be reviewed by Baghdad and turned into service contracts.
The Kurdistan Regional Government adopted its own oil and gas law in 2007 and signed more than 40 production-sharing contracts with foreign firms, which Baghdad deems illegal. (Additional reporting by Waleed Ibrahim in Baghdad and Shamal Aqrawi in Arbil; Editing by Jim Loney and Anthony Barker)