Armenia on Thursday said it had decided to extend the life of its Soviet-era nuclear reactor by four years until 2020 despite concerns raised by environmentalists in the earthquake-prone country.

"The prolongation of the existing nuclear plant's operation is needed to ensure energy security and the energy independence of Armenia, taking into account the time (needed) to build a new unit," authorities said in a statement.

The Metsamor nuclear plant provides around 40 percent of electricity in landlocked and resource-poor Armenia and the authorities hope to construct a newer reactor there by the end of 2017.

It stands just 30 kilometres (20 miles) from the capital Yerevan, close to the border with Turkey, and is located in a seismic zone hit by a massive earthquake in 1988 that killed 25,000 people.

Officials said they have the backing of the International Atomic Energy Authority to help extend the plant's life and build the new reactor.

"We presented the official position of the government and it got the IAEA's full support," Prime Minister Tigran Sarkisian told a cabinet meeting.

After the Fukushima nuclear disaster in Japan last year, Metsamor was inspected by IAEA experts who advised better safety measures but did not identify any "extraordinary" problems.

Local environmentalists have however raised concerns that the reactor could be at risk in the event of another earthquake, although the government has insisted it would be safe.

The plant was closed for five years after the 1988 quake until energy shortages led to its reopening, despite objections from Europe and the United States.

Concerned over the reactor's high-risk location and ageing facilities, the European Union in 2004 offered to provide 100 million euros ($131 million) in compensatory aid if Armenia agreed to shut it down permanently.