Iraq has signed an initial deal with China National Offshore Oil Corporation (CNOOC) and its partner Sinochem Corporation to develop the Missan oilfield complex.
The consortium accepted a fee of $2.30 for every additional barrel of oil produced at the 2.5 billion barrel field in southern Iraq, oil minister, Hussain al-Shahristani told reporters in Baghdad on 8 March.
The field currently produces 100,000 barrels of oil a day (b/d). The government has set a target of 275,000 b/d. The companies originally projected the field’s plateau output at 450,000 b/d.
The deal comes eight months after Baghdad’s poorly attended licensing round in June 2009, where only one contract was awarded, for the Rumaila field, out of eight on offer. The Missan field was included in the licensing round but received only one bid from the Chinese consortium.
The companies initially submitted a bid for $21.40 for every additional barrel before lowering their bid to $18.09 a barrel and then abandoning their bid altogether. A state-owned oil company was expected to take over development of the field in the absence of an international oil company.
CNOOC will hold a 60 per cent stake in the venture, while a state-owned oil company will hold 25 per cent and Sinochem the remaining 15 per cent.
The deal is a risky one. Areas on the outskirts of the Fakka field, which is included in the Missan complex, became the focal point for a border dispute late in December when they were occupied by Iranian forces.
Although withdrawn shortly, “the incident sent a strong message to Iraq to involve it [Iran] in all matters concerning the development of reservoirs along the disputed border”, says Samuel Ciszuk, Middle East analyst at IHS Global Insight.
The involvement of Chinese companies in the fields presents a relatively good solution given Iran’s increasing dependency on Chinese companies for technology and investment in their own energy sector.
China is now the largest single investor in Iraq’s oil and gas sector with CNOOC and Sinochem in Missan, China National Petroleum Corporation in Rumaila and Halfaya, in addition to Sinopec’s operations in the autonomous Kurdish region.
With the latest deal to be officially signed in the coming days, the Iraqi oil ministry’s focus will now be to ensure the investments aimed at boosting the country’s oil production to 4.7 million b/d by 2016 and as much as 12 million b/d by 2020, go ahead as planned.