March 20, 2009

Iraq initiates oil deal with China

On 11 March 2009 China inaugurated an oil project with Iraq, activating the war-torn country's first major oil deal with a foreign firm since 2003. Iraqi Oil Minister Hussain al-Shahristani joined Chinese officials at the al-Ahdab field in SE Wasit province, which should eventually produce 110,000-130,000bpd. The Chinese National Petroleum Co. (CNPC) will operate al-Ahdab under a contract, initially signed under Saddam, which the Iraqi Government renegotiated last year to change it from the production-sharing agreement reached in 1997 to a set-fee service deal. The government of Prime Minister Nuri al-Maliki is courting top foreign firms in two bidding rounds for long-term service contracts for major oil and gas development fields. Last November, after a series of hard talks, the two sides signed a new contract in Baghdad, allowing CNPC to explore and develop the al-Ahdab Oilfield in the next 23 years. CNPC began construction at Ahdab in January. No drilling has started. Iraqi officials have said that part of the CNPC deal was an agreement to pipe energy to a nearby power station. According to the contract, China will receive a service charge of USD 6 per barrel of oil produced at al-Ahdab, which will be gradually reduced to USD 3 per barrel.