China Signs $3 Billion Oil Deal with Iraq

China hailed a three-billion-dollar oil agreement with Iraq as a win for both nations.

Becoming the first foreign firm to enter such an agreement since the end of Saddam Hussein's regime, state-owned China National Petroleum Corp. (CNPC) this week won the right to develop the Al-Ahdab oil field south of Baghdad.

"The cooperation between the relevant oil companies from China and Iraq is mutually beneficial," foreign ministry spokesman Qin Gang said after the Iraqi embassy in Beijing said the deal had been reached. "It will be conducive to the economic development of Iraq, and will meet China's demands in the oil field as well, and is also conducted according to market rules and will not harm any interests of any third parties."

The agreement, reached during a visit to China by Iraqi Oil Minister Hussain al-Shahristani, revives a 1997 contract that granted China exploration rights to the Al-Ahdab oil field in the province of Wassit. After China won the rights to the al-Ahdab field in a deal then valued at $700 million over 23 years, activities were suspended due to UN sanctions and security issues following the U.S.-led war in 2003 that toppled Saddam.

Planned oil production was then 90,000 barrels per day (bpd), and CNPC had been expected to win the new exploration rights. The Iraqi embassy statement said the new deal would be worth three billion dollars, but other details were sketchy.

The oil field will become operational in three year's time and is likely to produce oil for 20 years after that, an Iraqi oil ministry official who took part in al-Shahristani's delegation said.

At the end of June, Iraq's oil ministry threw open six oilfields and two gas fields for international bidding by 41 companies. The deals, which are service contracts only, pave the way for energy firms based abroad to return to Iraq 36 years after Saddam threw them out.