Chinese oil firms expanding in rich southern Iraqi fields

Chinese oil firms expanding in rich southern Iraqi fields

Chinese oil firms expanding in rich southern Iraqi fields

Workers adjust the valves of oil pipes at West Qurna oilfield in Iraq’s southern province of Basra. China National Petroleum Corp has emerged as the frontrunner to take over Iraq’s West Qurna-1 oilfield. REUTERS photo

The Chinese oil sector, which is increasingly becoming active in Iraqi oil fields, has neared another leading contract to replace U.S. Exxon Mobile at the West Qurna-1 oilfield, as Russian bidder Lokoil has withdrawn from the race.

“We have analyzed all the risks and decided that, as we have been implementing such a global project as West Qurna-2 without a partner, we would have taken great risks by entering another big project such as West Qurna-1,” Andrei Kuzyayev, head of Lukoil Overseas, told Russian state TV channel Rossiya-24.

West Qurna-1 became available for Lukoil and other major companies last month when ExxonMobil informed the Iraqi government it wanted to pull out of the $50 billion project in southern Iraq.
China National Petroleum Corp (CNPC) unit PetroChina is negotiating for Exxon’s 60 percent in the West Qurna-1 project and that there are rival bidders, Reuters quoted Iraqi and Chinese sources as saying. Royal Dutch Shell is a minority partner.

For China, a major buyer of Iraqi crude, access to reserves is a strategic imperative, and Beijing is prepared to accept tougher terms and lower profits than Western oil majors and even Russian firms, which have to answer to shareholders, Reuters said.

One of the key beneficiaries of the Iraqi surge in oil flows from Iraq will be China, the International Energy Agency said in a report in October.

New trade axis

“There’s a new trade axis being formed between Baghdad and Beijing ... the B&B link,” said IEA chief economist Fatih Birol, who wrote the report.

Chinese firms such as PetroChina, China National Petroleum Corp. and China National Offshore Oil Corp. are partners or operators in a number of Iraqi oil fields. Chinese companies are also building railways across the country. Baghdad expects Exxon to complete the sale of its shares in West Qurna-1 by the end of December and the U.S. company has told Iraq it is already in talks with other oil majors.
The U.S. firm has riled the Iraqi central government by signing deals with the autonomous Kurdistan Regional Government (KRG) in the north.

Lukoil has been trying to offset production declines at its brownfields in Russia’s West Siberia, which accounted for some 56 percent of its total production last year by increasing its portfolio of foreign upstream assets.

KRG ‘halts exports’

Meanwhile, a KRG official said the administration had suspended oil exports over a payment row with the central government in Baghdad.

Ali Hussein Balo, adviser to the KRG Ministry of Natural Resources, said yesterday Baghdad failed to fulfill its commitment to pay the full 1 trillion Iraqi dinars (about $848 million) to companies working in the region, according to Agence France-Presse. Balo said it only paid 650 billion Iraqi dinars (about $550 million). In April, the KRG stopped the export of around 100,000 barrels a day due to delays in payments. Four months later, the exports resumed. That allowed the two sides to reach a new agreement on payment.

Baghdad has said the payment suspension was because the Kurds were pumping less than the 200,000 barrels a day they pledged.

Separately, Iraq and Jordan agreed on Dec. 24 to extend an oil pipeline to the Red Sea city of Aqaba for the export of Iraqi crude, Prime Minister Nouri al-Maliki said after a fleeting visit to Amman.