A huge oil discovery in Kurdish Iraq sent the share price of Heritage Oil, the London-based explorer, soaring yesterday and added further pressure on Baghdad to issue permits for long-awaited exports of crude oil from the region.

Heritage said that tests completed on a well drilled in its Miran West concession revealed reserves of between 2.3 billion and 4.2 billion barrels. Heritage reckons that between half and 70 per cent of the oil is recoverable, suggesting that at least one billion barrels can be brought to the surface.

The company’s shares rose 24.9 per cent to close at 500p as analysts concluded that the find would transform Heritage much as Rajasthani oil made the fortune of Cairn Energy and Ghana did the same for Tullow.

The find has potentially greater political consequences: at present there is no export route for Kurdish oil because of continuing arguments between Baghdad and the Kurdish Regional Government (KRG) in Arbil. Negotiations are under way to secure permits from Baghdad to allow oil from Tawke, a separate discovery by DNO, a Norwegian oil company, to be transported via Iraq’s northern pipeline to the Turkish port of Ceyhan.

A third company, Addax Petroleum, has also made a large discovery but the addition of a potential several billion barrels from Miran West could significantly enhance Iraqi oil exports.

“Iraq is an area where you can find giants,” Paul Atherton, chief financial officer of Heritage, said. “We are 65 kilometres from Kirkuk.” Kirkuk is one of Iraq’s biggest and oldest oilfields, discovered by a European consortium in the 1930s. It originally had 22 billion barrels of oil.

Ethnic and political jealousies have dogged the KRG efforts to develop an oil industry independently of Baghdad with the help of foreign investors. While Exxon, Shell and Total waited for opportunities to exploit known giant oilfields in southern Iraq, the Kurdish authorities granted licences to small but adventurous firms to drill in unexplored regions in the north.

Times Recommends

• ‘Lame duck’ fear for FSA as chief quits
• Storm over bailout of EU's most ailing economy
• Northern Rock to drop 100% savings guarantee