UPDATE 2-DNO lifted by hopes Iraq oil deal close

(Recasts with Iraqi statements, analyst, background)

By Wojciech Moskwa and Joergen Frich

OSLO, April 16 (Reuters) - Shares in Norwegian oil and gas producer DNO (DNO.OL) soared on Wednesday on hopes Iraq is close to finalising an oil and gas law for Baghdad to back oil contracts signed by Kurdish authorities.

DNO shares initially jumped by as much as 24 percent on media reports -- later denied by Iraq's oil ministry -- of a completed deal for Baghdad to honour oil contracts signed by the Kurdish regional government.

The shares pared gains to trade up 16.8 percent at 10.20 crowns by 0857 GMT, making it the biggest gainer on the Oslo bourse .OSEBX which was up 1.1 percent.

DNO was the first western oil company to sign production sharing contracts with the regional Kurdistan government after the U.S.-led invasion five years ago. But DNO still needs Baghdad's permission to start exporting its oil from north Iraq.

An Iraqi oil ministry official denied a deal was made. He said he was "astonished" at the reports and added that the Iraqi oil ministry continues to view the contracts signed by the Kurdish regional authorities as "illegal and void."

But Iraq's Prime Minister Nuri al-Maliki said in Brussels that the Gulf state was close to agreeing the final version of the long-delayed oil and gas law, giving some hope to investors betting on DNO quickly winning an export license.

"We don't have any other information other than what's been seen in the media," DNO Chief Executive Helge Eide told Reuters.