There is no precedent for proven oil reserves of this magnitude being offered up for sale, said Muttitt. “The nearest thing would be the post-Soviet sale of the Kashagan field [in the Caspian Sea], which had 7bn or 8bn barrels.”

China’s state-owned oil group, CNPC, has already agreed a $3bn (£1.78bn) oil services contract with the government of Iraq to pump oil from the Ahdab oil field.

The deal is the first major oil contract with a foreign firm since the US-led war and was followed up by an agreement with Shell, potentially worth $4bn, to develop a joint venture with the South Gas Company in Basra.

This deal has also triggered controversy. Issam al-Chalabi, Iraq’s oil minister between 1987 and 1990, questioned why there had been no competitive tendering for the gas-gathering contract and claimed it had gone to Shell as the spoils of war.

“Why choose Shell when you could have chosen ExxonMobil, Chevron, BG or Gazprom?” he asked. “Shell appears to be paying $4bn to get hold of assets that in 20 years could be worth $40bn. Iraq is giving away half its gas wealth and yet this work could have been done by Iraq itself.”

The Baghdad government says it aims to increase crude oil production from 2.5m barrels a day to 4.5m by 2013, but faces internal opposition from regional governors and political opponents.

The sale today comes as oil prices have plummeted after stockmarket turmoil on Friday. The price of crude fell by more than $4 at one point to $75 a barrel - the lowest point since September last year and a sharp drop from its peak of $147 in July. Opec, the oil producers’ cartel, has called an emergency meeting to agree a cut in output to bolster prices in spite of protestations from politicians including Gordon Brown. Brown said on Friday: “We’ve had some success in getting the price of oil down: the price this morning is roughly $80, about half what it was a few months ago. I want these price cuts passed on to the consumer as quickly as possible.

“I’m concerned when I hear that the Opec countries are meeting, or are about to meet, to discuss cutting production - in other words, making the price potentially higher than it should be.

“I’m making it clear to Opec it would be wrong for the world economy and wrong for British people who are paying high petrol prices and high fuel prices to cut production and therefore keep prices high.”

A government source said: “The one chink of light has been the fall in the price of oil. The last thing we want is to head into a difficult period with a return to high oil prices. People need to act responsibly.”