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China starts oil field project in Iraq

(Xinhua)
Updated: 2009-03-11 20:18

AL-AHDAD, Iraq -- On the largely spacious land of Iraq's eastern province of Wasit, Chinese faces among local Iraqis heavily guarded by security forces appeared on the site of the al-Ahdab oil field project the two sides agreed to jointly develop, which would see a 110,000 barrels per day (bpd) production in the coming six years.

Several trucks packed with oil equipment and workers in orange uniform are in their last-minute preparation for a kick-start of Iraq's first foreign oil works in decades.

A Chinese National Petroleum Company (CNPC) delegation on Wednesday formally opened the al-Ahdab oil field project in Iraq's eastern province of Wasit, aiming to help the war-torn country to quickly boost its oil production as promised.

Related readings:  CNPC inks $2.9b Iraqi oilfield deal

In the somewhat high-profile opening ceremony for the project in Kut, Wasit province, a number of delegates from both Chinese and Iraqi sides have participated, including Chang Yi, Chinese ambassador to Iraq and Hussein al-Shahristani, Iraqi Oil Minister.

"The al-Ahdab oil field project will become a model for the Sino-Iraqi cooperation in the future, as well as for cooperation between the two peoples," said Chinese ambassador Chang Yi, adding that the project will serve for the welfare of local Iraqi people and regional development.

Iraqi Oil Minister Hussein al-Shahristani said that the project served as a locomotive for local economy, and contributes to "both Iraqi national revenues as well as local peoples' welfare". He envisioned more cooperation to come between the two sides, given such project works well.

In the aftermath of wars and sanctions, and the following violence that plagued Iraq and consequently kept foreign investors outside, Iraq is now well poised with its ambitions of inviting foreign firms to bring expertise and investment to quickly improve its decrepit oil infrastructure and long paralyzed oil industry.

Wasit governor Latif al-Tarfa praised such cooperation, as it will help develop "regional oil, business, society and culture." He was also confident that such project would bring the province " from an agricultural one to a strong commercial one."

As the turbulent situations, featured by countless attacks and explosions here and there across Iraq stabilized dramatically during the past year, CNPC is eager to fulfill what it had promised to the war-torn state -- an output boost of 25,000 bpd in the following three years and 110,000 bpd within the 6 years ahead.

Zhi Yulin, board chairman of the Al-waha Co. that actually materializes such project, told Xinhua that members of the Chinese company have overcome a series of difficulties relating to the turbulent situation.

He vowed to boost oil output to 110,000 bpd in six years and create local employment opportunities, and boost business development of Wasit province as well as its industry recuperation.

Al-waha Co. is the joint venture of CNPC and another Chinese company, Zhenhua Oil Company for the project.

The state-owned CNPC had signed an agreement with Iraq's Saddam Hussein government in 1996, which was postponed by the UN sanctions on Iraq and the following U.S.-led invasion.

Last November, after a series of hard talks, the two sides signed a new contract in Baghdad, allowing CNPC to explore and develop the al-Ahdab Oilfield in the next 23 years.

However, Baghdad had somehow changed the original joint venture contract to a service contract with the Chinese side. The two sides have agreed on the only service contracts -- under which Iraqi state firms keep all the oil while paying Chinese company for its work -- rather than the former production sharing agreements Iraq signed with western companies in which the latter keep some of the output.

According to the contract, China will receive a service charge of 6 U.S. dollars per barrel of oil produced at al-Ahdab, which will be gradually reduced to 3 dollars per barrel.