Babylon's Hanging Gardens were one of the Seven Wonders of the Ancient World, but heritage appears to be no match for Iraq's booming oil industry in a dispute over a new pipeline.

As Baghdad is working to get UNESCO to list Babylon as a World Heritage Site, archaeologists and oil ministry officials are in a battle over a pipeline that one side insists threatens the site and could cause irreparable damage to the ruins.

Qais Rashid, head of the Supreme Board of Antiquities and Heritage, said the oil ministry drilled to extend a pipeline that runs about 1.5 kilometres (0.9 miles) in length, to transport petroleum products through the archaeological site of Babylon.

The pipeline was officially opened in March.

"The work could damage priceless antiquities belonging to the modern era of Babylon, especially by drilling," Rashid said.

Mariam Omran, head of the antiquities department in Babil province where the site lies, added that much of the archaeological area was still unexplored, and while no damage was visible, there was no telling what the impact was beneath the surface.

"There may be antiquities just centimetres below the ground," she said. "The antiquities at these sites have not yet been fully discovered, just like the rest of the historical landmark."

But oil ministry spokesman Assem Jihad defended the Babylon project, saying "it was carried out ... hundreds of metres (yards) from the archaeological sites."

"We did not find any traces or evidence of the existence of antiquities during the drilling operations."

Babylon lies some 90 kilometres (50 miles) south of Baghdad and is considered one of the cradles of human civilisation. It was the capital for two renowned kings of antiquity: Hammurabi (1792-1750 BC) and Nebuchadnezzar (604-562 BC), who built the Hanging Gardens.

The Inner City covers an area of 2.99 square kilometres (1.15 square miles) and the outer walls surrounding the city east and west of the Euphrates enclose another 9.56 square kilometres (3.69 square miles).

Listed as an archaeological site since 1935, it has been partially excavated over the past century, but much of the ancient city remains to be uncovered.

A 2009 report from The UN Educational, Scientific and Cultural Organisation (UNESCO) said "the archaeological city was plundered during the US-led war in 2003 that ousted Saddam Hussein. Contents of the Nebuchadnezzar and Hammurabi museums and of the Babylon Library and Archive were stolen and destroyed."

And the city was damaged by "digging, cutting, scraping and levelling" for a US military base that was located there from April 2003 to December 2004.

The Ishtar Gate and Processional Way were among key structures damaged, the UN agency said, as American forces made key adaptations to the historical site to fortify their base by building trenches and pits, and using chemicals to complete construction works.

Iraq is a country rich in history and archaeological sites that offer great potential for tourism, but the vast majority of government revenues still come from oil.

Exports are rising rapidly, averaging 2.508 million barrels per day in April and pulling in $8.8 billion (6.8 billion euros), with both figures at their highest levels since 1989.

The sales are providing much-needed income to help fund rebuilding of Iraq's dilapidated infrastructure, wracked by decades of war and sanctions.

"There have been two pipelines to transport petroleum products in the same location for more than thirty years," said Jihad, adding that "the new strategic pipeline supplies oil products from refineries to the south of Baghdad."

But Rashid unfurled a map of the site across his desk in his office in Iraq's National Museum and said: "The pipeline passes via the northern edge of the site, through the archaeological site, and then through the southern edge."

He said the pipeline presented "major risks," including pollution of the environment, and the threat of a potential explosion of the pipeline.

Omran showed off a visible section of the pipeline, which lies nearly two metres (6.5 feet) underground.

"The implementation of this project," she said, "is an extreme violation of the law on the protection of antiquities."

Iraq made three requests to establish Bablyon as a UNESCO World Heritage Site under Saddam Hussein's regime, but all were rejected because the site was badly administered, the organisation said.

Saddam did not properly care for the site, even rebuilding part of the city with bricks stamped with his initials.

But Rashid said "UNESCO stressed that it is not only the former regime, but the current regime in Iraq that also does not respect the antiquities."

UNESCO told AFP when asked about the pipeline that "it will respond formally on this matter" but gave no further details.

Rashid, however, claimed that "putting in the pipeline is like a bullet that killed our efforts to include the city of Babylon" as a World Heritage Site.