Arthur Millholland, president of AIM-listed Oilexco, is one of 270 names on an Iraq list of businessmen and officials who allegedly took illegal kickbacks from the Iraqi regime led by Saddam Hussein.
Millholland’s company is currently evaluating a third test well in the Brenda field in the outer Moray Firth, which has independently verified probable reserves of 15 million barrels. The figure could rise significantly if new exploratory drilling proves successful.
Last night Millholland denied any wrongdoing in Iraq. He said: "We were involved in exporting oil from Iraq from 1996, but at no time did I or the company pay any surcharges to Iraq officials.
"We have made full disclosure and have nothing to hide."
But Millholland’s inclusion on the Iraq list is threatening to take the shine off the company’s findings in the Brenda field.
Oilexco is to start production testing of its third appraisal well in the field this week.
Millholland said: "We would not be working there unless we were optimistic about what we were going to find."
Oilexco is currently looking for a permanent base of operations in Aberdeen as it consolidates its involvement in the North Sea.
Last month Millholland said there could be as much as 150 million barrels in the field, although this figure now appears optimistic. Oilexco was subsequently forced to issue a statement to the Canadian stock market, acknowledging that the figure of 150 million barrels of reserves had not been verified.
Oilexco, which has a market capitalisation of around 50m and has a staff of just 10 at its Calgary base, only gained licences to explore for oil in the UK continental shelf in the 20th licensing round in 2002.
It is employing what Millholland described as "a small army of contractors" in the north-east, but has no permanent staff on its payroll in Scotland.
But the company will take on dozens of new employees if drilling in the Brenda field uncovers further reserves.
When oil was discovered at Brenda, the UK Offshore Operators’ Association called the find "very encouraging".
It added: "Even in maturity, exploration in the UK continental shelf can still produce results. UKOOA estimates that there could be between five billion and 11 billion barrels of oil equivalent still to be discovered in UK waters."
Oilexco’s shares closed up 3.6%, or 3p, at 85p on Friday.