The US ambassador in Baghdad said on Saturday that the State Department has asked for a $6.2 billion budget for Iraq in 2012, underscoring that its oil and gas reserves were critical for the world's future energy needs.

"This country is on a glide path to increase its oil exports," James Jeffrey told reporters at the sprawling US embassy in Baghdad, the world's largest.

The embassy plans to double in size next year to 16,000 personnel, when it takes over many military tasks after US troops pull out of Iraq at the end of this year, including military sales and training of Iraqi security forces.

Nearly 50,000 American troops still remain, down from a high of 170,000 after the 2003 US-led invasion.

"Right now they are at about 2.2 million barrels (of oil) per day. They could go as high as four to six million within four or five years," he said, noting that energy-related facilities remained vulnerable to insurgent attacks.

"There's no other source of millions of new barrels in the pipeline anywhere in the world," Jeffrey said. "The implications on the price per barrel are dramatic."

Saudi Arabia, the only producer inside the Organisation of Petroleum Exporting Countries with an extra production capacity of about 1 million barrels per day (bpd), is able to control global prices, Jeffrey noted.

He said that Iraq was also critical to Europe's future gas needs.

"The only source of enough gas for Europe to become somewhat more diversified in energy sources -- or gas sources -- is Iraq," he said. "Azeri gas is not sufficient, Turkmen gas is many years off."

Iraq sits on one of the world's largest oil reserves -- 143 billion barrels by Baghdad's own estimates. It also has the world's 11th largest gas reserves, but decades of sanctions and wars have prevented effective production.

Current gas production -- all of it associated gas from oil wells -- is 42.5 million cubic metres per day, but half is burned off in flares from oil wells, according to Baghdad-based analyst Ruba Husari.

"Given the criticality of Iraq, given the investment we've made in it... the effort that we need to make and the amount of money required to make it is absolutely -- absolutely -- justified," Jeffrey said.

He added that his top concern for Iraq's future stability was insurgent Shiite groups that were beholden to neighbouring Iran.

"Not getting some of these militias under control can undercut rule of law and governance in those areas where they are allowed to roll around free," Jeffrey said.

He said two of the groups, Ketaeb Hezbollah and Asaib Ahel al-Haq, "are nothing more than thuggish clones" of Iran's Revolutionary Guards.

Last week Major General Jeffrey Buchanan, the US military spokesman in Iraq, told AFP that the two groups, plus the Promised Day Brigade, were responsible for attacks against US forces, which last month suffered their worst casualties in three years with 14 soldiers killed, most in rocket attacks.

Buchanan accused Iran of supplying more lethal weapons to those groups.

Iranian Defence Minister Ahmad Vahidi dismissed as "ridiculous lies" US claims that Tehran smuggled weapons to Iraq and Afghanistan, the semi-official Fars news agency reported on Saturday.