China has begun pumping oil in southern Iraq in the first new oil field brought on line in the Middle Eastern country in more than 20 years.
The state-owned China National Petroleum Co. (CNPC) announced in its newspaper Tuesday the opening of the al-Ahdab field, located roughly 110 miles southeast from Baghdad.
The field began operating June 21, according to CNPC.
CNPC claims that the project, which had cost the company $3 billion, marks “significant progress in CNPC’s building of major oil and gas cooperation projects in the Middle East.”
The field is estimated to hold a billion barrels of crude oil and is expected to produce 115,000 barrels of oil daily by 2017.
The contract of the Iraqi government with CNPC to develop the al-Ahdab field, signed in November 2008, was the first oil field deal signed between the Iraqi government and an international company.
The contract gives full control of the oil field to the Iraqi government.
The Chinese government, instead of receiving a share of ownership of the field, will receive a fee of $6 per barrel, which will decrease to $3 when oil production reaches its maximum. The fee will be paid for 23 years.
The fees, while low compared with the market price of oil, will yield a small profit over the lifetime of the contract for CNPC because of the low costs of oil production in Iraq and the size of the reserves.
The lower fee of $3 is more than a dollar higher than fees paid at other fields in Iraq, which were put up for competitive bidding. CNPC signed its contract seven months before the first round of competitive contracts were awarded.
Al-Ahdab is not the only field that CNPC has developed in Iraq. CNPC and BP both produce in the Rumaila field in southern Iraq, estimated to be the largest in the country.
CNPC also is invested in Halfaya Field, near the Iranian border.
CNPC’s investments in Iraq, all signed in the past three years, mark the company’s largest investment in the Middle East. Iraq, a member of Organization of Petroleum Exporting Countries (OPEC), has the fourth-largest oil reserves in the world but is only the ninth-largest producer of exportable oil.
CNPC is best known in the United States for its investment in Sudanese oil fields, where the company, along with the Chinese government, was accused of protecting the state from international sanctions, while providing money and arms to the Sudanese government.
The al-Ahdab field was discovered in 1979. In 1997, CNPC negotiated a contract to develop the field with the late dictator Saddam Hussein. But the contract could not be implemented because of U.N. sanctions on Iraq that blocked oil sales from the country between the Persian Gulf wars.
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