By Ahmed Rasheed

BAGHDAD (Reuters) - The creation of a new Iraqi National Oil Company to run the OPEC member's energy sector is not essential and might confuse the work of the oil ministry, Iraq's oil minister said on Sunday.

Iraq's cabinet approved a draft law setting up a new national oil company in 2009, but the legislation has languished amid political turmoil and a change of government in the war-battered nation.

"If this law was passed, then I ask 'What would it add to Iraq's oil sector?' I say nothing," Oil Minister Abdul-Kareem Luaibi said in an address to parliament's oil and energy committee. "Our companies are doing the same job. No need for establishing this company."

The long-awaited creation of the Iraqi National Oil Company (INOC), which would revive a state-run firm established in the 1960s and merged into the Iraqi Oil Ministry in 1987, had been a central plank of Iraq's plan to turn around its struggling oil sector to take advantage of its vast mineral wealth.

A package of legislation including a modern hydrocarbons law, a revenue-sharing law and a law to restructure the oil ministry has sparked fierce debate and disagreement between political parties for years.

The semi-autonomous northern Kurdish region has been moving aggressively to develop oil and gas reserves in its territory, clashing with the central government over who has the authority to sign oil contracts.

Amendments to the draft oil law are being reviewed by the cabinet's energy committee before it refers the legislation to parliament.

Luaibi criticized the duties of INOC described in the draft bill, which include entering into exploration, drilling, development and production contracts, as well as contracts for shipping oil and gas.

"If we have two organisations with the job of marketing oil, then this will definitely create problems," he said.

Thamir Ghadhban, the top energy adviser to Prime Minister Nuri al-Maliki, defended the bill and said reviving INOC was vital for the development of the energy sector.

"The establishment of an independent National Oil Company is very essential to develop Iraq's energy sector, with the oil ministry to ... formulate oil policy," Ghadhban said.

(Reporting by Ahmed Rasheed; Editing by Jim Loney and Will Waterman)