(Adds detail, background) By Mariam Karouny BAGHDAD, Jan 17 (Reuters) - Iraq's Oil Committee has agreed a final draft of an Oil Law that sets rules for sharing revenues and boosting output and aims to bring in billions of dollars of foreign investment, an Oil Ministry spokesman said on Wednesday. The draft, drawn up senior national and regional leaders, calls for a federal committee headed by the prime minister to oversee all future contracts. It will have the power to review existing deals signed under Saddam Hussein or by the Kurdish regional government, 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 the world's third biggest known crude oil reserves has been a key demand of the United States in providing further military support to the national unity government. The negotiating team, headed by Deputy Prime Minister Barham Salih, had finalised the draft late on Tuesday, Jihad said, and the bill would go to the full 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 would be set up to develop production and exports and the law is intended to ensure balanced development of the oil industry across Iraq's regions, Jihad said. It establishes a mechanism for centralising oil revenues and distributing them to the various regions. 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, some of whom are close to Iran. 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 and ethnic Arabs and Turkmen accuse the Kurdish militants of ethnic cleansing before a referendum on the city's future which, under the constitution, is due this year. The Sunni Arab minority dominant under ousted president Saddam Hussein is concentrated in Baghdad and regions immediately to the north and west where there are few known hydrocarbon reserves -- though some potential future finds. Sunnis have been particularly insistent that the central government in Baghdad control the oil industry, despite a new, U.S.-sponsored constitution, opposed by most Sunnis, which gives newly created federal regions some powers over oil and gas. Washington and the government of Shi'ite Prime Minister Nuri al-Maliki are mounting a major security crackdown in the divided capital Baghdad over the coming months to avert an all-out civil war there between Sunni insurgents and Shi'ite militias.
