Irish oil and gas exploration company Petrel Resources is in talks to extend its oil exploration activities into the most dangerous part of Iraq.

The company, which has been in the country since before the toppling of Saddam Hussein in 2003, has been invited by the Iraqi government to test parts of the centre of the country for oil. The area, between Iraq's two major rivers, is the most unsettled part of the country. Until now, most oil exploration has taken place in the east and south of the country.

"The world desperately needs major new oil discoveries," David Horgan, Petrel's managing director, said at the group's agm. "Apart from Saudi Arabia and Iran, Iraq is the only place you are going to get this."

Since the toppling of Saddam Hussein, Iraq's oil exports have more than halved to about 1.2 million barrels a day. The government is seeking to boost this, though is struggling with limited powers until the country's constitution is drawn up at the end of the year.

Iraq, the world's third most oil-rich country, has 115 billion barrels of proved oil reserves after very limited exploration, and may have as much as 300 billion barrels, according to Mr Horgan. This compares with 268 billion barrels of reserves in Saudi Arabia and 130 billion in Iran.

"We are very committed to expanding our activities in Iraq," said Mr Horgan. "There is great potential and we are in an excellent position to take advantage of it."

Mr Horgan said that the company's study of the East Safawi Block, near Iraq's border with Jordan, had been positive and it is now seeking to negotiate a production sharing agreement with the Jordanian authorities.

Separately, the company is awaiting confirmation that it has won a contract to operate the Subba & Luhais oilfield in the south of the Iraq.

If successful, it will pump oil from the site and transport it to Japan. Mr Horgan said that while Petrel's primary aim is to be an exploration and development company, it has to take on contractual work to build relationships with the Iraqi government in order to win future exploration work.

Mr Horgan said he hoped to pump as much as 200,000 barrels a day from the site.

The company's shares, which are listed on London's AIM, rose 2 pence, or 6.2 per cent, to 34.5 pence.