"The minister said the signing of this contract is against Iraqi law and its constitution," Hussein al-Shahristani told Ha Tae-yun during a meeting in the capital.

The billion-dollar agreement was signed last June between Iraq's autonomous region of Kurdistan and state-run Korea National Oil Corp (KNOC), and Korea's largest refinery, SK Energy.

The firms were to have access to eight oilfields believed to hold 7.2 billion barrels of untapped crude. Five of the fields are located near the capital Arbil in northern Kurdistan.

The South Korean companies were expected to secure nearly two billion barrels of oil in return for investing 2.1 billion dollars in the development of the region's infrastructure.

The South Korean embassy refused to comment.

Iraq sits atop the world's third-largest proven crude reserves after Saudi Arabia and Iran and oil is its major source of revenue.

But violence and bitter disagreements between the central government and the Kurdish region over oil rights has held up much of the exploitation of the massive estimated reserves of 115 billion barrels.