Iraq Oil Report

China says a multi-billion dollar oil deal with Iraq is still being negotiated. This contradicts reports last week from Iraqi officials, who said the deal had been signed, Daniel Schearf reports for Voice of America.

China’s Foreign Ministry on Thursday said negotiations with Baghdad to exploit an Iraqi oil field continue.

Iraq’s embassy in Beijing last week said Iraqi officials had signed a $3 billion deal with China National Petroleum Corporation.

Iraqi officials in Baghdad later confirmed the reports, but China’s Foreign Ministry spokeswoman, Jiang Yu, indicated they were wrong.

Iraq should solve security problems and set up a credible legal framework for cooperation with international oil companies.

Carlo Stagnaro, Director of the Energy Department in the Italian Bruno Leoni Institute, told Trend Capital by e-mail that huge investments were needed to rebuild the oil infrastructures. This leads to the need to set up a credible legal framework.

“If at least a reasonable certainty is provided, a double dividend can be expected for Iraq: oil and gas exploitation will help the country to start growing, and the wealth creation may help to stabilize it politically,” Stagnaro said.

Fresh details have emerged of the service deal signed with China for the development of the Al-Ahdab oil field, giving an indication to other oil majors about the type of contracts on offer in the country in the continued absence of an oil law.

London-based consultant Global Insight says China National Petroleum Corporation (CNPC) will develop the field and manage production for a 20-year period at an initial price of $6-a-barrel, which will fall to $3-a-barrel as investments are recouped.

Around 25,000-barrels-a-day (b/d) is expected to be produced in the first three years, rising to 110,000 b/d in the future, Middle East Business Intelligence reported.

Global Insight notes that although CNPC is not allowed to market the crude itself, the relationship will place it in a good position to guarantee a flow of oil from Iraq to China.

Iran is pressuring Iraqi authorities to exclude U.S. oil majors from contracts to develop the country’s massive oil fields, sources at the Oil Ministry said.

The sources, speaking on condition of anonymity, said the authorities currently favor Chinese and Russian companies to those of the United States, Azzaman reported.

Their remarks come following a contract the ministry signed last month with China’s state-owned oil firm CNPC.

The $3bn oil services contract is a renegotiated deal of the Ahdad oilfield which CNPC had agreed to develop in 1977.

China is the first country to win such a contract since the 2003 U.S. invasion of the country.

“After several very difficult years, economic prospects for Iraq are improving and the authorities are persevering with the implementation of their economic program in 2008. With the recent improvement in security, oil production and exports are increasing while inflation has been reduced,” the IMF said. “Progress has been made in strengthening governance and fighting corruption in the hydrocarbon sector, through oil-metering and Iraq’s participation in the Extractive Industries Transparency Initiative. An extension of the metering system to all oil sector activities will further strengthen transparency in the sector.”

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