China to develop Iraq oil fields

Last updated 08:00 18/05/2010

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A China-led consortium sealed a deal with Iraq yesterday to develop a prized cluster of three oil fields in the country's south, bringing China closer to becoming the dominant foreign player in Iraq's recovering oil sector.

The agreement brings to 11 the number of deals signed with international oil companies since bidding began in June. Four of those deals and one reached in 2008 involve Chinese companies, reflecting Beijing's drive to seek new energy sources for its growing economy.

The state-run China National Offshore Oil Corp and its partner, the state-run Turkish Petroleum Corporation, will develop the Missan oil fields. The consortium plans to increase the output in six years to 450,000 barrels a day from Missan's current daily production of nearly 100,000 barrels.

The consortium will get $US2.30 for each barrel produced under the 20-year deal.

The three-field cluster is located near the city of Amarah in southern Iraq and holds over 2.6 billion barrels in reserves.

The Missan fields were among eight oil and gas fields Iraq offered in June during the first bidding round in the three decades since Saddam Hussein nationalized the oil sector.

Monday's deal is a step forward in Iraq's efforts to develop its dilapidated oil industry and bring in sorely needed cash for reconstruction after years of war, sanctions and neglect.

"Iraqis now have the right to feel proud about the huge achievements in developing the oil industry," Iraqi Oil Minister Hussain al-Shahristani said at the signing ceremony in Baghdad.

Iraq sits on the world's third-largest oil reserves - at least 115 billion barrels.

Oil revenues make up nearly 95 percent of Iraq's income, and since the US-led invasion in 2003, the government has been trying to reconstruct its battered oil infrastructure, wooing international oil companies to tap into its vast natural resources despite lacking legislation governing the energy sector.

Last month, Iraq approved an ambitious five-year-plan aimed at increasing its crude oil production to 4.5 million barrels a day by 2014. The plan foresees oil exports hitting 3.1 million barrels a day in 2014, up from current nearly 2 million barrels a day this year.

The president of the Chinese oil firm praised Monday's deal.

"This is something we've been looking for for a long time," Yang Hua told reporters in Baghdad after Monday's signing ceremony. "We are more than willing to share our experience with the people of Iraq in the process of developing the oil and gas infrastructure."

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The Chinese ambassador to Iraq, Chang Yi, said Beijing is encouraging Chinese companies to invest in Iraq.

"The Chinese economy is growing rapidly and is in dire need to import crude and Iraq is a main producing country," Yi said.

The first oil deal in Iraq for a Chinese firm went to the state-run China National Petroleum Corp. The $US3 billion deal in 2008 was to develop the 1 billion-barrel-a-day al-Ahdab oil field in central Iraq.

In the two bidding rounds last year, the company added two more deals, including one in which it partnered with Britain's BP PLC to develop Iraq's biggest oil field, the 17.8 billion-barrel Rumaila field in Basra.

A China-led consortium sealed a deal with Iraq on Monday to develop a prized cluster of three oil fields in the country's south, bringing China closer to becoming the dominant foreign player in Iraq's recovering oil sector.

The agreement brings to 11 the number of deals signed with international oil companies since bidding began in June. Four of those deals and one reached in 2008 involve Chinese companies, reflecting Beijing's drive to seek new energy sources for its growing economy.

The state-run China National Offshore Oil Corp. and its partner, the state-run Turkish Petroleum Corporation, will develop the Missan oil fields. The consortium plans to increase the output in six years to 450,000 barrels a day from Missan's current daily production of nearly 100,000 barrels.

The consortium will get $US2.30 for each barrel produced under the 20-year deal.

The three-field cluster is located near the city of Amarah in southern Iraq and holds over 2.6 billion barrels in reserves.

The Missan fields were among eight oil and gas fields Iraq offered in June during the first bidding round in the three decades since Saddam Hussein nationalized the oil sector.

Monday's deal is a step forward in Iraq's efforts to develop its dilapidated oil industry and bring in sorely needed cash for reconstruction after years of war, sanctions and neglect.

"Iraqis now have the right to feel proud about the huge achievements in developing the oil industry," Iraqi Oil Minister Hussain al-Shahristani said at the signing ceremony in Baghdad.

Iraq sits on the world's third-largest oil reserves - at least 115 billion barrels.

Oil revenues make up nearly 95 percent of Iraq's income, and since the US-led invasion in 2003, the government has been trying to reconstruct its battered oil infrastructure, wooing international oil companies to tap into its vast natural resources despite lacking legislation governing the energy sector.

Last month, Iraq approved an ambitious five-year-plan aimed at increasing its crude oil production to 4.5 million barrels a day by 2014. The plan foresees oil exports hitting 3.1 million barrels a day in 2014, up from current nearly 2 million barrels a day this year.

The president of the Chinese oil firm praised the deal.

"This is something we've been looking for for a long time," Yang Hua told reporters in Baghdad after Monday's signing ceremony. "We are more than willing to share our experience with the people of Iraq in the process of developing the oil and gas infrastructure."

The Chinese ambassador to Iraq, Chang Yi, said Beijing is encouraging Chinese companies to invest in Iraq.

"The Chinese economy is growing rapidly and is in dire need to import crude and Iraq is a main producing country," Yi said.

The first oil deal in Iraq for a Chinese firm went to the state-run China National Petroleum Corp. The $US3 billion deal in 2008 was to develop the 1 billion-barrel-a-day al-Ahdab oil field in central Iraq.

In the two bidding rounds last year, the company added two more deals, including one in which it partnered with Britain's BP PLC to develop Iraq's biggest oil field, the 17.8 billion-barrel Rumaila field in Basra.

- AP

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