CNOOC Seals Deal on Iraq Oil Field

CNOOC and Turkish Petroleum Corp. have signed a 20-year contract to develop the Missan oil-field in southern Iraq

By Chen Zhu

CNOOC Ltd., the Hong Kong-listed unit of China National Offshore Oil Corp. has partnered with the state-run Turkish Petroleum Corp. (TPAO) to win a contract with Iraq to develop the lucrative Missan oil-field in southern Iraq, marking CNOOC’s first upstream access to Iraqi oil following its two major rivals, CNPC and Sinopec.

According to CNOOC, the 20-year contract includes an increase of Missan’s production capacity to 450,000 barrels per day from the current 100,000 barrels a day within six years. CNOOC has agreed to price every additional barrel of oil produced after capacity rises by 10 percent at US$ 2.30.

CNOOC will be the operator and hold 63.75 percent of the interest. TPAO will have 11.25 percent interest while an Iraqi drilling company will hold the remaining 25 percent.

Located 350 kilometers southeast from Baghdad, the Missan oil-field complex includes Fakka oil field, Buzurgan oil field and Abu Ghirab oil field. The estimated reserve of the complex is 2.5 billion barrels.

The deal is still pending Iraqi government approval.

CNOOC started bidding for the Missan contract in June last year, partnering with Sinochem International Corp. The two companies proposed to increase production to 450,000 barrels a day and charge US$ 21.40 per barrel, exceeding the Iraqi government’s US$ 2.30 proposal.

Last summer, the two sides held rounds of negotiations and the companies concluded to sell on the proposed price. However, Sinochem International later decided to withdraw from the deal without explanation. An industry analyst close to the company speculated that Sinochem was concerned with numerous risks associated with the deal.

Last week, Abdul Mahdy al-Ameedi, head of the Iraqi Oil Ministry’s Petroleum Contracts and Licensing Directorate, announced that TPAO had joined the consortium with CNOOC.

The other two major Chinese oil companies, CNPC and Sinopec, have also gained a foothold in the Iraqi oil industry. In November 2008, CNPC and China North Industries Corp. set up a joint venture and signed a 20-year development contract for Al-Ahdab Oilfield.

In June 2009, CNPC and BP jointly won the bid for a 20-year a technical service contract of Rumaila oil field. The companies plan to see a rise in Rumaila’s oil production to 2.8 million barrels per day from 1.1 million, charging US$ 2.00 per barrel.

In late 2009, CNPC setup a consortium with Total and Malaysia’s Petronas to develop Halfava oil field by charging US$ 1.40 per barrel.

Sinopec made its expansion in Iraq in August 2009, through the US$ 7.24 billion purchase of the Swedish oil firm Addax, which has operations in Iraq.

( Caixin Online )

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