(EnergyAsia, November 29 2012, Thursday) — Nearly a decade after the US military invasion of Iraq, launched presumably to take over the world’s second largest oil reserves among other reasons, it is China, an opponent of the ill-fated war, that has made some of the biggest gains.
The various post-Saddam regimes have awarded Chinese state-owned companies lucrative long-term contracts to develop some major oil fields that, according to the International Energy Agency (IEA), could double Iraq’s production to over 6.1 million b/d by 2020.
China is also well on its way to becoming Iraq’s largest customer, possibly importing two million b/d or a nearly quarter of Iraq’s projected 8.3 million b/d production by 2035, said the IEA. Iraq supplied just 275,000 b/d or about five percent of China’s oil imports last year.
Last June, a PetroChina-led consortium started oil production at the 16-billion-barrel Halfaya oil field in Iraq’s southern Maysan province. The subsidiary of CNPC, China’s largest energy producer, holds a 37.5% stake in the consortium while France’s Total SA and Malaysia’s Petronas Carigali each have an 18.75% stake, and Iraq’s State Partner South Oil Company owns the remaining 25%.
In November 2009, a BP-led consortium which includes CNPC and Iraq’s South Oil Oil Co signed a US$15 billion 20-year service contract with the Iraqi government to develop the giant Rumaila oilfield.
Iraq will also look to China for investment to rebuild its economy and infrastructure damaged and neglected from decades of war and neglect. China’s willingness and ability to support the costly rebuilding of Iraq makes it a formidable long-term player that is unlikely to be matched by the West.
“A new trade axis is being formed between Baghdad and Beijing,” observed Fatih Birol, the IEA’s chief economist.
Contributing to Chinese advancement in Baghdad is the growing interest among Western majors to deal directly with Kurdistan, the restive oil-rich province in northern Iraq.
Leading by example, Exxon Mobil is sticking to the agreements it signed last year with the Kurdistan regional government (KRG) despite Baghdad’s repeated warnings that it views them as illegal.
In response, Baghdad has declared that it is prepared to sell off ExxonMobil’s stake in the US$50-billion project to develop the coveted 8.7-billion-barrel West Qurna 1 field in southern Iraq to China’s CNPC and Russia’s Lukoil. That message is seen as a warning to Total, Chevron and Russia’s Gazprom to stop further discussions with the Kurds if they want to be assured a stake in developing Iraq’s oil reserves, the world’s fourth largest.