Iraq's oil minister Hussein al-Shahristani on Tuesday defended his strategy for tapping the country's vast energy reserves, insisting that output must increase before new fields can be explored.

Iraq is due next Monday or Tuesday to announce which of 31 foreign and state-owned bidders have won deals to operate six major oil fields and two gas fields, for which the government will pay fees rather than share profits.

Shahristani, accused by MPs of mismanagement resulting in 10 billion dollars in lost revenue for a federal budget that is projected to go into deficit, insisted his policy is on track.

"We have started to develop the oil producing fields because it is faster and Iraq is in extreme need to increase its production," said Shahristani, stressing that unexplored fields would be opened to bidders in the future.

"The undiscovered fields need time for drilling. If we keep working on our existing fields without digging anew and putting in more effort, production will decrease," he added.

Shahristani said the new contracts are "not in danger" and will be announced at the end of the month as planned as there is no parliamentary opposition.

He also hit back at criticism from Iraq's autonomous Kurdish region, which earlier on Tuesday said Baghdad's policy was "unconstitutional and against the economic interests of the Iraqi people."

The oil ministry and Kurdistan are at loggerheads over how foreign companies working to exploit the nation's vast oil and gas reserves should be paid.

Iraq's decision to award service contracts differs from Kurdistan, where numerous profit-sharing deals have been struck.

"The regional government of Kurdistan has made clear progress in increasing Iraq's oil exports and oil revenues in a short time," it said in a statement.

"This progress has been made by focusing on exploration and not on existing fields, in line with the best practices of international markets, and in accordance with the principles of the Constitution of Iraq.

"The regional government regrets that it cannot say the same thing on the procedures taken by the Federal Ministry of Oil of Iraq," the statement added.

Article 109 of Iraq's constitution says that oil and gas resources must be developed "in a way that achieves the highest benefit to the Iraqi people," in a way "consistent with market principles and that best encourages investment."