The head of the Royal Commission into Australian corporate involvement in the UN oil-for-food scandal, Terence Cole QC, has asked the Australian government for powers to investigate and make findings against BHP Billiton and its associated companies.

The resources giant was dragged into the scandal after it emerged at the inquiry that AWB wheat supply contracts with the UN were inflated by $US8m to recover a debt that Saddam Hussein's regime owed BHP.

Cole said evidence suggested that BHP might have breached UN sanctions when it provided $5m worth of wheat on credit to Iraq in the mid-90s.

BHP is alleged to have paid for the wheat in am effort to secure the rights to develop the Halfaya oilfield in southern Iraq once UN sanctions were lifted.

In 2002 it handed responsibility for the wheat debt to Tigris Petroleum, a Gibraltar-registered run by two former BHP staffers that shared a Baghdad office with BHP.

AWB (formerly the Australian Wheat Board) has admitted it struck a deal with Tigris to inflate the price of a 1m-tonne shipment to Iraq to recover the money owed to BHP (by then $US8m including interest).

Cole said it was "incongruous and inappropriate" that the current terms of reference of the inquiry prevented him from finding against BHP and Tigris. Attorney General Philip Ruddock has indicated he was likely to agree to expand the inquiry’s scope to include BHP Billiton.

BHP CEO Chip Goodyear said the company it has been carrying out an internal investigation into matters raised at the Cole inquiry, but many of the executives involved in the original wheat deal have since left the company.

However, BHP's current head of petroleum Phil Aiken was the person responsible for assigning the Iraqi debt to Tigris, the inquiry was told. It seems likely he will soon be asked to explain himself.

The whiff of scandal will not help the company sell its proposed Californian LNG terminal to the people and policymakers of the US. Having that project turned down would be a high price to pay for its Iraqi scam, which after all was chasing an amount that was small change for such a giant company.