UPDATE 1-Iraq cabinet approves bill on national oil company

(Adds Iraq government comment)

BAGHDAD, July 29 (Reuters) - Iraq's cabinet approved a draft law establishing a National Oil Company, the government spokesman said on Wednesday, but added the company could not be set up without passage of a package of delayed energy laws.

"This law is connected to the oil and gas law, they're all one package ... It's a technical issue, but (the decision) is not activated because it's tied to a political issue," spokesman Ali al-Dabbagh said.

Iraq hopes the hydrocarbon laws will renew its run-down energy sector. The legislation has been stalled by a long-running dispute between Iraq's largely autonomous northern Kurdish region and the Arab-led government in Baghdad.

In a statement posted on Dabbagh's website late on Tuesday, he said the Iraqi cabinet had given its approval to the National Oil Company and the measure would now be sent to parliament.

Iraq has been seeking to revive its oil sector, which boasts the world's third largest oil reserves, and overcome the effects of decades of sanctions, war and neglect.

But the sector is the scene of a showdown between Arabs and minority Kurds, who want greater control of energy reserves and lay claim to land outside the current borders of their largely autonomous Kurdish region.