Iraq and China agree terms on $3 billion oil deal

by Rich Bowden - Sep 2 2008, 23:21

China has won the race to be the first to exploit Iraq's oil fields following a deal signed with the Iraqi Government last week. The deal is worth a reported $3 billion USD.

Iraqi Oil Minister Hussein al-Shahristani said on Tuesday his country's cabinet had approved the deal last week, an agreement which gives Beijing first access to the world's third-largest oil reserves. The deal will see China's state-owned company China Petroleum National Corp. develop the Al-Ahdab oil field in the central province of Wasit.

"The Chinese company will charge six dollars per barrel of production as service fees which would decrease gradually to three dollars," Shahristani told press representatives gathered inside Baghdad's heavily fortified Green Zone, newsagency AFP reported.

The Oil Minister added the contract was expected to drill 25,000 barrels of oil per day in the first three years, with the life of the oil field expected to be some 20 years.

He added that the ongoing violence in the country would not obstruct the exploitation of the oil.

"Initial work would begin in two months, and we don't see security concerns as hurdles that would slow the project," Shahristani noted.

The agreement was a revival of a similar contract negotiated in 1997 under deposed President Saddam Hussein, which was suspended due to U.N. sanctions and then security issues.

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