Chief executive John Craven said the company had signed up a partner but was awaiting final approval for the deal from the Algerian authorities. He indicated that Petroceltic would continue to retain at least a 50% stake in the field.

However, he refused to comment on market speculation that the partner was a major European utilities company.

It is understood the company hopes to use a portion of the output from Petroceltic's field to operate its plants in southern Europe. As well as providing a guaranteed customer for Petroceltic, the company will also help Petroceltic to sell the remainder of its output to other customers. Petroceltic and its local partner, Algerian state oil company Sonatrach, will continue to manage the exploration and development of the field.

Craven said that, besides concluding the joint venture, Petroceltic planned to bid for further exploration licences in Algeria when they become available later this year. He also indicated that the company would consider strengthening its ties with Sonatrach.

Earlier this week, Algeria's energy minister Chakib Khelil outlined plans to expand Sonatrach, which already has interests in Latin America, Africa and Spain, with the aid of foreign partners. Craven said Petroceltic would "definitely consider" such a partnership with Sonatrach.

"We feel we have the expertise and we could offer them opportunities outside Algeria, " he said.

Craven downplayed the political risks involved in expanding in Algeria, where an Islamic group recently affiliated itself to al-Qaeda and there have been several recent suicide bombings. "Algeria has been relatively stable . . . we're not too worried about that, " he said.

Stuart Draper, head of research at Dolmen Stockbrokers, also said the risks were insignificant. "Where it operates in Algeria is low-risk compared with, for instance, Tullow's operations in Uganda, " he said.

Meanwhile, James McCullough of Davy Stockbrokers said Petroceltic's prospects in Algeria were good and that its current Algerian assets could be "seriously undervalued".

He added that it remained unclear how much investment would come into the firm as a result of planned joint venture but he said it would probably ensure that the company would not have to return to the market for more funding.