Iraq struck deals with consortia led by energy giants Shell and CNPC over massive southern oil fields yesterday, part of a two-day auction that seeks to dramatically boost the country's crude output.

The successful bids from the Anglo-Dutch and Chinese giants kicked off the sale, which aims to catapult Iraq towards the top of the list of the world's oil producers and bring in much-needed revenue to rebuild the country.

Iraqi Prime Minister Nuri al-Maliki highlighted the transparency with which the auction was being conducted, contrasting it with the "darkened rooms" in which now-executed dictator Saddam Hussein made deals over oil.

The contract for the enormous Majnoon field was jointly won by Shell and its Malaysian partner Petronas, while CNPC led a group comprised of Petronas and France's Total to capture Halfaya.

"The second round represents a new era in the history of the Iraqi oil industry," Mr Maliki said as he opened the auction.

Referring to the transparency of the auction, he said it was "very important because many international companies are participating, in public and on television."

"The old way was in darkened rooms, behind closed doors. But today, it is clear to everyone," Mr Maliki said.

Shell and Petronas requested fees of $1.39 per barrel of oil extracted from Majnoon, and projected that they would produce 1.8 million barrels per day. It beat out a rival offer from Total and CNPC.

The project will be split 60 per cent for Shell and 40 per cent for Petronas.

Majnoon, a giant oilfield near the Iranian border, currently produces 45,900 barrels of oil per day (bpd) and has proven reserves of 12.58 billion barrels.

"They (Shell-Petronas) will make a profit, but they have made a compromise on profits in order to secure the field," Ruba Husari, the founder and editor of www.iraqoilforum.com told AFP.

"The two (consortia) were so scared, they just wanted Majnoon, that they tried to undercut each other and one of them really went for the kill."

Mr Husari said the Iraqi government had had a "successful" day.

For Halfaya, CNPC, Petronas and Total requested $1.40 per barrel and projected production of 535,000 bpd. The field, which has known reserves of 4.1 billion barrels, is situated just north of Majnoon.

No bids were received to work on either the East Baghdad field or the cluster of fields referred to jointly as Eastern Fields, Oil Minister Hussein al-Shahristani said.

He added that although Angolan firm Sonangol submitted an offer to work on the Qaiyarah field, the government rejected the bid because it was too high.

Iraq relies massively on oil sales for its economic growth and government revenue. It will be hoping the auction, the second since June, generates positive headlines before a parliamentary election scheduled for March 7.

The country wants to boost its oil production to seven million bpd within six years, from the current level of 2.5 million, and is targeting 10 to 12 million bpd in the longer term, potentially rivalling Saudi Arabia.

The biggest oil fields on offer in the bid round are Majnoon and West Qurna-2, the latter of which has proven reserves of 12.9 billion barrels of oil and will be up for auction today.

Successful companies will be paid a fixed fee per barrel, not a share of the profits, and it will only be paid once an agreed production threshold has been reached.

A tight security perimeter was thrown up around the oil ministry for the auction, with some attendees having to abandon their cars around two kilometres away and walk the remaining distance.

All participants were subjected to multiple checks before being allowed to enter.

The auction came just three days after coordinated bombings struck Baghdad, mostly targeting government ministries, the third such attack since August.

Bombers have also repeatedly hit Iraq's oil infrastructure, most recently sabotaging the main export pipeline from northern Iraq to the Turkish Mediterranean port of Ceyhan in November.

In the first bid round in June, only one deal was reached because of the perceived low return on investment being offered by the Iraqi government, although two other foreign consortia have since signed deals with Baghdad.

At 115 billion barrels, Iraq has the world's third-largest proven oil reserves, behind only Saudi Arabia and Iran. Oil sales provide 85 per cent of government revenues.