The agreement sets out the technical and legal mechanism to invest in oilfields shared by the two countries, Iraq's Foreign Ministry Undersecretary Mohammed Haj Humud, told Kuwaiti daily Al Jarida.
Iraq and Kuwait had also agreed to contract international consultants to prepare a plan for joint development of the fields, he said.
Several oil fields are in the border area between Kuwait and Iraq, most prominently the Ratqa field, which is a southern extension of Iraq's giant Rumaila field.
In the weeks before the 1990 occupation, Baghdad accused Kuwait of stealing billions of dollars worth of its Rumaila oil through horizontal drilling. Kuwait denied the charge.
After the Gulf War, United Nations demarcation put all Ratqa wells within Kuwaiti territory.
Humud said that Kuwait and Iraq have concluded the border demarcation according to UN Security Council resolutions. Besides oilfields, the location of border posts on farms in the area was a factor in the dispute.
"After the border demarcation, a part of these farms is now on the border line and was divided up between Kuwait and Iraq, and Kuwait has recognized the ownership of these farms and has paid compensation for their Iraqi owners," Humud said.
According to the US energy department, the Ratqa field, which is run by state-owned Kuwait Oil Co, has a production of 45,000 barrel per day.
The Rumaila fields, operated by Iraq's South Oil Co, are giant fields accounting for most of Iraqi oil output. They pump around 1.3 million bpd.
Also extending into Kuwait territory is the Zubair oilfield, near the Rumaila field.