(KUNA) - China National Petroleum Corp (CNPC), the nation’s biggest oil company began operations of the first phase of the Al-Ahdab oilfield in Iraq on June 21 with an annual capacity of 3 million tons, the state-run China Daily reported Tuesday.
The project marks “significant progress” in CNPC’s construction of key oil and gas cooperative areas in the Middle East, Jiang Jiemin, general manager of CNPC, was quoted as saying in a company statement.
The oilfield, located 180 kilometers southeast of Baghdad, is the first major oil project to begin operation in Iraq for more than 20 years. Al-Ahdab is expected to produce 25,000 barrels of oil per day (bpd) in the first three years and 115,000 bpd in six years as stipulated in the contract, the state-owned company said, according to the paper.
The oilfield, in south-central Iraq, was discovered in 1979 and has estimated reserves of 1 billion barrels.
The deal was initially signed with the government of Saddam Hussein in 1996 but was postponed after the UN imposed sanctions on the war-ravaged state and the subsequent invasion led by the US in 2003.
CNPC finally signed the agreement under a technical service contract scheme, instead of the original production-sharing agreement, with Iraq’s Ministry of Oil in 2008 after protracted negotiations, allowing CNPC to develop the Al-Ahdab oilfield for the next 23 years.
The CNPC’s investment to develop and explore the oilfield is about USD 3 billion.
The adjusted contract, in which CNPC will receive a fixed fee for a barrel of oil instead of gaining an equity stake, as it would have done under the previous regime, would reduce CNPC’s profits, in particular in an era of high oil prices, the report said. But the oilfield is the biggest project for CNPC as a major operator in the oil-rich Middle East, which brought other qualified Chinese companies to participate in the big overseas projects.