Elise Razaka, director general of the Office of National Mines and Strategic Industries, said Exxon would set up an office in Antananarivo on Jan. 27.

"Because of the oil drilling works it will soon undertake offshore, Exxon Mobil is opening an office in Antananarivo," Razaka told Reuters.

Last July, Exxon boosted its oil and gas presence in Madagascar by taking a 70 percent interest in two licences held by small UK-listed oil explorer Sterling Energy (SEY.L: Quote, Profile, Research) .

Though largely unexplored, the government thinks the world's fourth largest island has big reserves of oil that are profitable to extract at current prices.

It expects to have production of around 60,000 barrels a day in the next 3-4 years, much of it coming from offshore blocs on the northwest coast.

Razaka said that in one of the blocs, Exxon had teamed up with privately held American explorer firm, Vanco Energy, and Norway's Norsk Hydro (NHY.OL: Quote, Profile, Research) .

"The offshore prospecting works undertaken off Mahajanga, in the northwest of Madagascar, will be launched at the beginning of the year," Razaka said.

Besides Exxon and Norway's Norsk Hydro (NHY.OL: Quote, Profile, Research) , which has its own concession in addition to its venture with Exxon, the government says it is negotiating with other oil giants.

These include Chevron Texaco (CVX.N: Quote, Profile, Research) , Royal Dutch Shell (RDSa.L: Quote, Profile, Research) (RDSb.L: Quote, Profile, Research) , BP (BP.L: Quote, Profile, Research) , Total (TOT.N: Quote, Profile, Research) , Norway's Statoil (STL.OL: Quote, Profile, Research) and China's National Petroleum Corporation.

The impoverished island of 17 million is also being explored by mining companies looking for gold, gemstones, nickel and titanium.

Madagascar, an island off the southeast coast of Africa, is known to have oil and gas reserves, but they are poorly mapped and drilling remains at an exploratory stage.