China's largest energy firm, PetroChina, will join ExxonMobil in developing Iraq's giant West Qurna oilfield and is in talks with Lukoil to buy into a second project at the field, according to the South China Morning Post.
China is already the top foreign player in Iraq's southern oilfields, and a deal at West Qurna would boost its dominance, making PetroChina the biggest single foreign investor.
"PetroChina will participate in developing the field," said an industry source with direct knowledge of the deal with Exxon.
The Morning Post's source said that the agreement will be announced in the coming weeks, but declined to give further details on how the world's two most valuable listed energy firms would work together in Iraq. Both PetroChina and Exxon declined to comment.
Exxon holds a 60 percent stake in West Qurna 1, a US$50 billion investment project pumping around 480,000 barrels per day (bpd).
In March, PetroChina's ex-chairman Jiang Jiemin told Reuters that the Chinese energy major was willing to team up with Exxon at West Qurna.
PetroChina is also in talks with Lukoil for a stake in another development project at the field, West Qurna-2, a Lukoil source said. That source also declined to give details on the size of the stake under discussion.
"Lukoil bosses have already said they would prefer an Asian partner, a Chinese partner, in the project to secure a guaranteed market for oil sales," the source said.
Lukoil's chief executive Vagit Alekperov has said that the company wanted a Chinese firm to replace Norway's Statoil at the project, after Statoil agreed last year to sell its 18.75 per cent stake.
West Qurna-2 is expected to produce 500,000 bpd in 2014, and need total investment of US$30 billion. Lukoil plans to invest US$5 billion in the project in 2013 alone.
Last year, Exxon offered to sell its stake in the southern Iraq West Qurna-1 oilfield after a dispute with Baghdad over contracts it signed with autonomous Kurdistan in the north, deals the central government rejects as illegal.
A Morning Post source familiar with PetroChina operations in Iraq said in March the two companies were discussing a deal that would enable Exxon to retain operator status at the oilfield, where Royal Dutch Shell is minority partner with 15 percent.
However, some industry sources have said it is unlikely that PetroChina would buy stakes in both projects, due to their sheer size and scale.
(Source: The South China Morning Post)