[Marxism] Iraq reaches oil agreement with China

[Sky Keyes-Vogt]

*Iraq reaches oil agreement with China*

http://www.iht.com/articles/2008/08/28/business/28oil.php?WT.mc_id=glob_mrktg_lnk1&WT.mc_ev=click

Iraq and China have agreed on the terms of a $3 billion oil service
contract, the Iraqi oil minister said Wednesday, announcing his country's
first major oil contract with a foreign company since the fall of
Saddam Hussein.

The oil minister, Hussain al- Shahristani, warned that time was running out
for big Western oil companies, which have pressed for years for Iraqi
contracts, to seal even short-term deals that had been expected to mark
their return to Iraq, which has the world's third-largest oil reserves after
Saudi Arabia and Iran.

Iraq and the Chinese state-run oil company, CNPC, have agreed on the
renegotiated terms of a deal signed in 1997 to pump oil from the Ahdab oil
field, Shahristani said. CNPC is the biggest oil and gas company in Asia.

"Finally we have reached an agreement," Shahristani said. "The total
investment of the project is expected to be about $3 billion."

Iraq has toughened the terms, changing the contract to a set-fee service
from the production-sharing agreement signed under Saddam.

Iraq needs billions of dollars of investment in its energy sector after
years of war and sanctions. With high oil prices and strong competition for
access to some of the world's cheapest oil to produce, Iraq has been
negotiating from a position of strength.

Under the revised contract, Ahdab will produce 110,000 barrels per day, up
from the previous target of 90,000 barrels per day, Shahristani said. The
first output would come in three years, and the field should pump for
20 years.

CNPC would own 75 percent of a joint venture to be set up for the contract
and Northern Oil of Iraq would own 25 percent, Shahristani said. The value
of the contract would be reviewed every quarter, he said.

The agreement is pending final approval by both governments.

The probability of a series of short- term service contracts with oil majors
was dropping after delays in signing, although negotiations are continuing,
Shahristani said.

Iraq wanted six contracts to increase oil output by 100,000 barrels per day,
each to be signed in June and put into effect within a year.

The firms that have been negotiating deals are Royal Dutch Shell; Shell in
partnership with BHP Billiton; Exxon Mobil; Chevron with Total. A smaller
consortium of Anadarko, Vitol and Dome had negotiated for another deal but
Anadarko dropped out this month.

Iraq still hopes to increase production by 500,000 barrels per day by the
mid-2009, Shahristani said. "We are working at increasing our production,
hopefully by another 500,000 bpd, by the middle of next year," he added.

Iraq pumped around 2.4 million barrels per day in July, according to a
Reuters survey.

A long-delayed draft oil law to set the framework for foreign investment was
unlikely to be approved in parliament in the near-future, Shahristani said.

"Different parliamentary blocs still have serious differences about the
law," he said. "I have not heard anything new from the parliament to make me
expect that the law will be passed any time  soon."

But Iraq was going ahead with new deals anyway under existing legislation,
he said.

Disputes with the regional government in Kurdistan have hobbled the progress
of the law. There had been no progress in resolving differences between
Baghdad and the Kurdish regional government, Shahristani said.