Petrel Resources, the Clontarf-based, AIM-listed oil company, says it will exploit the power vacuum in Iraq by laying claim to potentially lucrative drilling fields west of Baghdad.

Shareholders heard yesterday at the company's annual general meeting that Petrel will take charge of untapped oil fields deep in Iraq's western desert, although a question mark hangs over its entitlement to do so.

In the absence of a stable civilian government, Petrel is relying on a contract struck with Saddam Hussein's regime, which was awaiting presidential approval when war erupted.

Petrel's strategy is pinned on its conviction that once it establishes a presence in "Block 6", a 10,000 square kilometre zone in the heart of Iraq's western desert, a future government is unlikely to order it out.

Baghdad's oil ministry, which survived the war largely intact, has effusively welcomed Petrel back and the US administration has indicated it does not object to its presence, paving the way for test drilling in September.

With operating costs in Iraq less than $1 a barrel, the potential for profits is vast, said Petrel chairman Mr John Teeling.

"I have used the word squatting in jest, but the truth is that possession is nine-tenths of the law. Once we are established the chances of us being forced out are slim. Half a loaf is better than no bread," he said.

Petrel enjoyed a cordial relationship with Saddam Hussein's government, but Mr Teeling said the firm's dealings with the dictatorship will not come back to haunt it once self-rule returns to Iraq. Strong ties with the oil ministry, where mid-ranking staff had been allowed to carry on their duties, ensure that Petrel will be favourably positioned as the political outlook becomes clearer. Petrel is close to hiring several senior oil ministry figures purged by coalition forces, Mr Teeling revealed.

Iraqi workers will be employed on the ground, minimising the security risk. Because Ireland is perceived as a friend of Iraq, Petrel is convinced it holds a significant advantage over American and British rivals.

The Iraqi western desert is believed to be rich in oil deposits, and institutional investors are expected to bankroll the cost of developing the fields.

The Iraq move was unveiled at Petrel's a.g.m. in Dublin, at which all motions were passed. After- tax losses for 2002 were €238,080.