China Opens Oil Field in Iraq

China’s largest oil company has begun operations at Al-Ahdab oil field in Iraq, making the field the first major new area to start production in Iraq in 20 years, according to an official news report.

China Opens Oil Field in Iraq

Operations began June 21, and the field is expected to produce three million tons of crude oil per year, reported China Daily, an official English-language newspaper. The oil field was discovered in 1979 and is believed to contain a billion barrels of crude.

The Chinese company, the China National Petroleum Corporation, a state-owned enterprise, secured rights to the field under a technical services contract signed with the Iraqi government in November 2008. Under the contract, the company has development rights for 23 years, China Daily reported. It is investing $3 billion.

The contract, the renegotiation of a deal first signed in 1996 with the government of Saddam Hussein, was postponed after the United Nations imposed economic sanctions on Iraq and the American military toppled Mr. Hussein in 2003. Analysts say the Ahdab operation is China National Petroleum’s largest in the Middle East.

The contract stipulates that the company receive a fee for every barrel of oil produced, rather than an equity interest in the oil field, as it would have under the original agreement with Mr. Hussein’s government. A Chinese oil executive said in 2009 that the company would make a profit of less than one percent, but that the contract was a way to “get a foot in the door” of the Iraqi oil industry, which has much larger fields than Ahdab.

The Ahdab field’s estimated reserves are small by Iraq’s standards. The Rumaila field near the southern city of Basra, for which China National Petroleum and BP signed a development deal in June 2009, is Iraq’s largest oil field, with an estimated 17.8 billion barrels. Iraq as a whole is estimated to have reserves of more than 100 billion barrels.

The New York Times/April Media

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