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Exxon’s Iraq stake can be bought by a Chinese oil company

20 Jan 2013
A little more than a year, since the USA President Barack Obama announced that the wars in Iraq will be end, Chinese companies have shown huge interest on the oil sector of Iraq. China National Petroleum Corp. (CNPC) is operating three fields in cooperation in the south producing 1.4 million barrels a day – more than a half Iraq’s production. Malaysia and China have the biggest share of worldwide deals, says an official in the Iraqi Oil Ministry, named Abdul Mahdy al-Ameedi. Al-Ameedi is in charge of petroleum deals and licensing says that they are pretty much satisfied with the Chinese companies’ works. Now a Chinese oil major might buy the Exxon Mobil’s (XOM) position in the West Qurna-1 field, which has reserves worth $ 50 billion. Derek Scissors, who is a senior research fellow at the Heritage Foundation, who specializes in China’s state-owned enterprises, spoke in the month December with an oil executive of China whose company was in negotiation with the Iraqis over the stake of Exxon. The Chinese executive gave a warning that it was not a done contract, says Scissors. The Iraqi Oil Ministry and Exxon will not make any comment on a feasible contract. The oil industry of Iraq is abuzz with rumors that CNPC’s Hong Kong-listed subsidiary, PetroChina, is the highest bidder. The spokesman of PetroChina did not return back to the e-mails or phone calls. A stake in West Qurna-2 field, which is a nearby one, could go to the Chinese as well. The second-biggest public oil company of Russia, Lukoil operates that field, but its partner in that project, Statoil of Norway, had pulled out. The Lukoil head, Vagit Alekperov told to the Russian media on 15th January, 2013 that an attractive partner for Russia would definitely be China, especially where there is a steady demand growth. Iraq, which pumps 3 million barrels of crude per day, is predicted to reach 8 million barrels by the year 2035, according to the Paris-based International Energy Agency. By then, 80 % of Iraqi production will go to China. Baghdad to Beijing is the new Silk Road of the global oil trade – oil from Baghdad and capital investment from Beijing, says Fatih Birol, who is the chief economist at the IEA. Chinese construction of power plants has cemented the relationship. Wenran Jiang, who is a political scientist at the University of Alberta, who studies China’s energy industry, says that it will really be helping that the Chinese develop fields at lower costs than their opponents. Chinese managers and engineers usually earn a quarter the wages paid by Western companies, guesstimates Jiang. With Iraq offering foreign operators as little as a couple of dollars per barrel created, it is hard to earn money, says Trevor Houser, a natural resources and energy expert at China-focused consultancy Rhodium Group. A few companies, Exxon included, are turning to the Kurds, whose terms are more generous. China may have little choice but to accept the terms offered by the Oil Ministry of Iraq. Foreign oil meets around 60 % of China’s requirements today. That will likely rise up to 80 % by the year 2035, says Lin Boqiang, who is the director the China Center for Energy Economics Research at Xiamen University. Lin also says that it not that China like going to Iraq but it is rather, not that many places are left as options. Source: [Business Week]
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