WELLINGTON (AFP) - New Zealand Prime Minister John Key on Tuesday dismissed concerns about allowing oil exploration in waters set aside to protect the world's rarest dolphin as "mumbo jumbo".

The Maui's dolphin, the world's smallest and rarest sub-species, is found only in shallow waters off the North Island of New Zealand, with scientists estimating there are only about 50 left. A large marine sanctuary has been created to protect the critically endangered animal, which has been dubbed "the hobbit of the sea".

But the government this month revealed it wanted to open up a 3,000 square kilometre area of the reserve to oil exploration.

While conservationists fear a mishap could tip the Maui's over the edge, the government argues that the dolphins do not actually live in the area of marine reserve where exploration will be allowed.

Mr Key said oil drilling began in the wider Taranaki Basin in the 1960s and it would be "economic lunacy" to close down the industry for conservation reasons.

"We've been drilling in the Taranaki region since the 1960s and there's never been a situation where a Maui's dolphin has been killed," he told parliament. "It hasn't happened in the last 50 years, it's just the mumbo jumbo that the greens go on about."

Earlier this month, the International Whaling Commission's (IWC) scientific committee, representing more than 200 marine experts, warned that the Maui's would disappear unless fishing is banned in its habitat.

Conservation Minister Nick Smith rejected the call for more protection, saying he was not "in the business of banning fishing (in areas) where there is no evidence Maui's dolphin exists".

The grey and white Maui's, named after a Polynesian demi-god, has a maximum length of 1.7 metres.