ANALYSIS - Iraq's oil power grows, but firms eye election

By Simon Webb

DUBAI (Reuters) - Iraq has taken a step closer to becoming a giant on the global oil stage, but political manoeuvrings either side of elections in January may yet stall plans to nearly triple oil output.

Baghdad is near to signing off on deals to pump millions more barrels per day from the world's third-largest reserves, potentially vaulting it to third from eleventh position in the league of top oil producers.

But for foreign oil firms, politics threaten the legitimacy of contracts and are a big investment risk. Disputes have already hindered attempts to attract the billions of dollars needed to overhaul an industry run down by years of sanctions and war.

"Contract legality is still unclear," said an executive at a major oil firm bidding for Iraq deals. "That's the major problem now. Iraq has gone a long way to clarifying other issues, the deals look better, but who will ratify them? And will ratification be respected by the next government?"

Iraq has awarded a deal to a consortium led by Italy's Eni to develop the giant Zubair field and boost output by nearly a million barrels per day.

That deal - and another awarded to BP and China's CNPC to boost output at Rumaila by another 1.8 million bpd - awaits ratification by Iraq's cabinet.

But there is no agreement in Iraq on who has authority to approve the deals. The oil ministry says cabinet ratification is enough. Some MPs say only parliament has the authority. Oil firms fear future governments could tear up old contracts.

The problem is part of a wider dispute. More than six years after the U.S.-led invasion and the toppling of Saddam Hussein, Iraq has yet to reach consensus on how to develop and share oil wealth. The stalemate has delayed a new oil law for years and left it struggling to keep output from shattered infrastructure at pre-war levels.