Asia's fourth-largest economy has been competing with China and India to secure energy reserves and ensure crude supplies at a time when oil prices are surging, while grappling to curb inflation in the face of costlier energy.

Under the agreement, South Korea will help Iraq rebuild infrastructure in return for crude oil or stakes in the facilities, a statement and officials from the economy ministry said.

As part of the agreement, South Korea will receive the crude supply, equivalent to about 10 percent of South Korea's total 2.4 million-bpd oil imports, or 8 percent of the country's combined 3.15 million-bpd oil and gas imports, if requested, the ministry statement and officials said.

"Although details on the supply will be discussed later, South Korea can ask Iraq for oil if sudden geopolitical or other issues in a certain other oil exporter brought it to stop oil supply suddenly," one ministry official said.

"The Iraqi government said in previous negotiations that it has a capacity to provide 250,000 bpd of oil first to South Korea in an emergency situation."

US crude prices have jumped more than 20 percent so far this year and consumers in the world's largest economies are starting to show the strains of higher fuel costs.

Global benchmark US crude futures rose to their highest in 2-1/2 years on Thursday, as the Federal Reserve appeared in no rush to tighten monetary policy, weakening the dollar, and as gasoline stockpiles fell more than double forecast.

NYMEX crude for June rose 66 cents to $113.42 a barrel by 0316 GMT, after rising as high as $113.70. London Brent crude gained 55 cents to $125.68 a barrel.

Under Thursday's bilateral deal, South Korea will soon give details on investments in Iraq, including in steelmaking, refining, fertilizer production and housing, the statement said.

Iraq sits on the world's fourth-largest oil reserves and flares around 700 million cubic feet of gas every day at its southern oilfields. It needs to harness energy to generate electricity and end chronic power blackouts that still plague the country almost eight years after the US-led invasion that toppled Saddam Hussein.

The South Korean ministry statement also said priority would be given to South Korean firms to procure crude oil from the Middle Eastern oil producer under long-term contracts.

Last year, South Korea imported 60 million barrels of crude oil from Iraq, or about 7 percent of its total crude import of 872 million barrels, the statement said.

The deal failed to include any solution over whether state-run Korea National Oil Corp. (KNOC) would be allowed to bid for any Iraqi oil fields, according to the second ministry official.

Due to long-lasting disputes over foreign oil deals between the semi-autonomous Kurdish region and the Iraqi central government, KNOC has been barred after a Korean consortium led by the state-run entity secured exploration rights from the Kurdish region for the Bazian oil field in the Dahuk area of northern Iraq.

Iraq on Monday formally invited international energy firms to compete for 12 new exploration blocs in a fourth oil and gas bidding round, but delayed the auction until January next year.

So far only Korea Gas Corp., another state-run entity, can bid for Iraqi oil and gas fields.