Iraq’s Al Ahdan oil field, which was awarded to China National Petroleum Corp. Thursday, is expected to start first crude oil production in 2009, an Iraqi oil ministry spokesman said.
"The oil field is expected to start oil production in a year’s time from when work would start," Assem Jihad told Dow Jones Newswires by telephone from Baghdad Thursday.
Jihad said the oil field would produce up to 25,000 barrels a day once the first stage has been completed after a year.
"The field would reach a production capacity of 125,000 barrels a day in later stages," he added.
The Al Ahdab field is located in Wasit province, about 160 kilometers southeast of Baghdad.
Jihad said the field would also supply fuel to a nearby power station in al-Zubaidiya in Wasit province. The station is being built by a Chinese company.
The 20-year contract was signed in Beijing Thursday during a visit to China by Iraqi oil minister Hussain al-Shahristani. The $3 billion oil service contract is to develop Al Ahdab field in Wasit province, with a proven oil reserve of 1 billion barrels.
The signing makes China National Petroleum Corp. the first foreign oil firm to enter an agreement with the central Iraqi government to invest in the domestic oil industry since the 2003 U.S.-led invasion.
CNPC originally had an agreement with the ousted regime of Saddam Hussein to develop the Al Ahdab field, giving it a 23-year stake in profits.
However, CNPC couldn’t implement the original contract at the time due to U.N. sanctions imposed on Saddam’s Iraq between 1990 and 2003, which barred direct dealings with the country’s oil industry.
Iraq has changed the terms, amending the contract from a production-sharing agreement to a set-free service deal.
The new service contract specifies that China will receive fees for work carried out on the field but Iraq will keep the profits, the oil ministry said in a statement last week.