Iraq, China discuss reviving Saddam-era oil deal

Team Infidel

Forum Spin Doctor
Media: Reuters
Byline: Ahmed Rasheed
Date: September 27, 2006

BAGHDAD, Sept 27 (Reuters) - Iraq could hand China the first foreign
contract to develop its vast oil resources if Beijing agrees to put into
effect a deal originally signed with Saddam Hussein, Iraq's Oil Ministry
said on Wednesday.

While U.S. oil majors, excluded from Iraq before the U.S. invasion in 2003,
wait for Iraq to pass new laws on the sector before investing, Oil Minister
Hussain al-Shahristani will visit China, Japan and Australia shortly to
discuss projects and developing exports, ministry spokesman Asim Jihad told

"The minister will discuss with Chinese companies fulfilling previous
contracts signed with the former regime," he said.

He declined to give specific dates for the trip.

Iraqi oil officials have previously said they believe China will agree to
develop the 90,000-barrel per day (bpd) Ahdab field in south central Iraq as
the first project since the war.

The field, with an estimated development cost of $700 million, was awarded
to China National Petroleum Corp and Chinese state arms manufacturer Norinco by Saddam.

The deal, like others signed by Saddam, was effectively frozen by
international sanctions and then Saddam's overthrow.

Several wells are already delineated, however, although there is no
production from Ahdab at present. A second field, East Baghdad, is also
slated for priority development.

The four-month-old government has given priority to Ahdab because of its
proximity to new power stations and refineries. The ministry has previously
said it expects output to increase from 30,000 bpd to a full capacity of
90,000 over two years.

"The visit comes while the oil investment law is waiting to be approved by
parliament," Jihad said of Shahristani's tour.

Iraqi ministers have said they hope to see legislation by the end of the
year setting down the terms on which foreign companies can invest in
hydrocarbon resources to help Iraq develop its war- and sanctions-ravaged
oil industry.

Shahristani has said he hopes to discuss investment with a range of major
international companies once the law is passed.

"During his tour the oil minister will meet major oil companies to discuss
partnerships in building and developing new oilfields and projects under the
new investment law," Jihad said, adding that he was also keen to develop
export markets.

"Iraq wants to increase exports to the Asian market, especially China and
Japan, due to rising economic growth in those countries."

Oil, of which Iraq has the world's third biggest proven reserves, accounts
for some 95 percent of the national income and the government is struggling
to expand output and exports in the face of deteriorating infrastructure and

Average exports from southern fields were 1.65 million bpd so far in
September, Jihad said, and the hope was to reach 1.8 million bpd soon. But
pumping from the northern fields to the Turkish port of Ceyhan was still
halted due to sabotage.

"The daily loss from damage to the northern oil pipelines is from 300,000
bpd to 400,000 bpd," he said. "We are working to fix the pipeline and resume
exports soon."

Russian and French companies that signed or negotiated deals under Saddam
have been keen to hold onto the advantage in the face of challenges from
firms from the United States and elsewhere. New Iraqi leaders, brought to
power by the U.S.-British invasion, have yet to take decisions.