"The Iraqi oil ministry is signing a preliminary contract with Pakistan Petroleum to explore for natural gas in Iraq's eastern provinces of Diyala and Wasit," Asim Jihad, head of the ministry's media office, was quoted as saying.

In May, the Pakistani company won exploration concession during Iraq's fourth energy auction.

The company is due to work in a 6,000 square km block in Diyala and Wasit that have presumed natural gas reserves.

It won the contract by offering pound 3.453 per barrel of oil equivalent.Iraq's fourth energy auction offered 12 new oil and gas exploration blocks, but only three contracts were awarded to foreign energy companies.

The Iraqi oil ministry also awarded two contracts to Kuwait Energy and Russia's Lukoil.

The three deals are, however, needed to be approved by the Iraqi cabinet before signing the final agreements with the foreign companies. Iraq has proven reserves of 112 trillion cubic feet of natural gas, but because of poor infrastructure of the oil and gas industries, the country is only producing 1.5 billion cubic feet a day. The country depends on oil revenues for nearly 95 percent of its budget. In 2010, Iraq announced its proven oil reserves had increased to 143.1 billion barrels, rising from the previous estimate of 115 billion barrels.