Iraq’s cabinet has approved a $3 billion oil service contract with China, the government of Prime Minister Nuri al-Maliki said today, in a move that could signal the shape of anticipated future oil deals.
"The cabinet has approved a service contract to develop and produce the Adhab oilfield between the (Iraqi) Northern Oil Company and a Chinese company, according to terms initialled by both sides," Reuters quoted government spokesman Ali al-Dabbagh as saying in a statement.
The Iraqi government recently announced renegotiated terms of an oil deal with the Chinese National Petroleum Company (CNPC), which was originally signed in 1997.
The deal marks the first major oil contract with a foreign company for Iraq, which boasts the world’s third-largest proven reserves, since the fall of Saddam Hussein.
CNPC, the parent company of PetroChina and Asia’s biggest oil and gas company, has a head start as foreign companies line up to sign lucrative long-term oil deals with Iraq.
The CNPC deal is sure to be watched closely by companies seeking to secure the most profitable terms they can in any contracts brokered with Iraq.
Iraq toughened its terms in renegotiating the CNPC deal, changing the contract to a set-fee service deal from the oil production sharing agreement (PSA) signed under Saddam.
Under the revised deal, according to Oil Minister Hussain al-Shahristani, Adhab will produce 110,000 barrels per day, up from the previous target of 90,000 bpd.
The Adhab field is in Wasit province, south of Baghdad and bordering Iran.