London-listed energy producer Dragon Oil, which is 54 per cent owned by Dubai's state-owned Emirates National Oil Company, is set to make a £500 million ($800 million) bid for Irish oil company Petroceltic.

Dragon Oil's move comes in line with its plans to boost the company's presence in Algeria, where it was awarded new oil and gas licences last week.

Petroceltic said on Monday that Dragon Oil intended to offer 230 pence a share, a 35 per cent premium to the Irish company's recent average stock price.

At 0745 GMT, Petroceltic shares were up 20.6 per cent to 215.25 pence, while Dragon Oil's were down 0.3 per cent to 572 pence.

The proposal is not a firm offer and remains to be approved by Dragon Oil's biggest shareholder.

Petroceltic said it would be willing to accept the offer once Dragon Oil's majority shareholder approved it, and if certain unspecified conditions were met.

One of Petroceltic's main assets is the Ain Tsila gas field in Algeria, a market where Dragon Oil recently obtained new drilling licences in a consortium with Italy's Enel.

Dragon Oil's main production assets are in Turkmenistan.

"Petroceltic would bring Dragon Oil additional reserves in its focus areas," a Dragon Oil spokesman said, adding a deal would also diversify its portfolio and give it access to assets across the whole exploration and production cycle.

Petroceltic said any deal would be subject to approval by the Algerian government in relation to its Algerian assets.-Reuters