DEAD SEA, Jordan: A top US oil executive said on Saturday he was discouraged by deepening tension between Washington and Tehran which was preventing his company from striking deals in Iran's huge energy patch.

US oil majors are already losing the race to their European and Asian energy rivals due to Washington's unilateral sanctions on Iran.

But ConocoPhillips Chairman Archie Dunham told Reuters that although he hoped the two governments could find a diplomatic solution so his company could get down to business things seemed to be getting worse.

"I'm disappointed and discouraged with the lack of progress that's occurring between our two governments," Dunham told Reuters on the sidelines of an extraordinary meeting of the Davos, Switzerland-based World Economic Forum.

"It seems like the level of criticism between our two governments is increasing, not decreasing."

Washington sanctions have prevented US firms from investing in Iran, holder of the world's fourth largest oil reserves, since 1995.

US officials have met several times with Iranian officials in Geneva this year with little visible progress on improving ties.

Relations between the two countries remain strained due to US concerns over Tehran's nuclear policy and charges that Iran allegedly supports terrorist groups.

But Dunham was hopeful that direct engagement could eventually lead to a breakthrough. "I continue to encourage dialogue, engagement, negotiation face-to-face, government-to-government," said Dunham.

"We hope that at some point in the future our governments will come together and resolve their issues and we'll have the opportunity to grow our company in that country as well."

The US major might have more immediate success in neighbouring Iraq, where Dunham has offered his company's technical expertise to help revive Iraq's once-mighty oil sector, home to the world's second biggest oil reserves.

But the chairman said the post-war looting and more than a decade of United Nations sanctions had taken their toll on the oil sector of Iraq.

"I'm not at all optimistic that Iraq is going to dramatically increase production and cause some kind of a problem in world oil supply," he said. "They've got a huge job before them just to get their production back to where it was before the war."

Iraq is now pumping near 750,000 barrels per day (bpd) - well down on pre-war levels of 2.5 million bpd.

"They've got a job to do first of all to determine where they need help and then we're prepared to respond to those problems," said Dunham adding that they would be prepared to lend a hand both in the upstream and downstream sectors.

"We have offered the technical capability of our company to the coalition," said Dunham, adding that he and the company's chief executive officer Jim Mulva had met with the State Department.

He reckoned some $2-$3 billion a year would have to be invested immediately to get Iraq's oil sector in working order.

He said Conoco had yet to discuss long-term oilfield investment in Iraq, but was hoping to secure a long-term crude oil supply contract.

"Long-long term we would hope to have an oil opportunity in Iraq," said Dunham. "Long, long, long term we would like to be in Iran for either gas or oil."

Dunham, however, was tight-lipped about the company's investment potential in Saudi Arabia, where Conoco had hoped to invest in major gas projects in the kingdom.