BEIJING (AFP) — China National Petroleum Corp (CNPC), the country's largest oil producer, said Wednesday that it had signed a three-billion-dollar deal to develop an oil field in Iraq.
The contract, signed on Monday in Baghdad, allows CNPC and another Chinese company, Zhenhua Oil, to develop the Al-Ahdab oil field in the province of Wasit for 23 years, CNPC said in a statement on its website.
Oil production is expected to reach 25,000 barrels per day in the first three years and expand to 115,000 barrels per day in six years, it said.
While output from the field will be exported, a portion of it will be used to fuel power generation stations nearby to alleviate electricity shortages in Iraq, it added.
The project, the first major oil development deal that a foreign firm has secured in Iraq since the fall of Saddam Hussein in 2003, revives a contract signed in 1997 that granted China exploration rights to the Al-Ahdab oil field.
After China won the rights in a deal then valued at 700 million dollars over 23 years, activities were suspended due United Nations sanctions and security issues following the US-led invasion in 2003.
Baghdad said earlier it had managed to change the previous joint venture contract into a mere service agreement, under which CNPC would charge a service fee of six dollars a barrel. The fee will decrease eventually to three dollars.
China's demand for oil has increased markedly in recent years, as its economy has grown at double-digit pace and its population of more than 1.3 billion people has grown richer.
The Al-Ahdab oil contract is not expected to generate any revenues for China except the service fees, but still offers an entry into Iraq's oil reserves ahead of Western majors.
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