BAGHDAD - A Chinese state oil firm must start work developing Iraq's Ahdab oil field within the next two months or risk losing the $3 billion service contract, Iraq's oil minister said.
The Iraqi government said last week it had approved the contract between Iraq's North Oil Company and the Chinese National Petroleum Company (CNPC).
"We have asked the Chinese company to start developing the al-Ahdab field immediately. It ... should start the field work within two months, otherwise the contract will be cancelled," Oil Minister Hussain al-Shahristani told state-owned Iraqiya television in a pre-recorded interview broadcast on Sunday.
He said Iraq's insecurity would not be an excuse for failing to start work on time.
The Iraqi government renegotiated the deal from one originally signed in 1997.
It marks Iraq's first major oil contract with a foreign firm since U.S.-led forces ousted Saddam Hussein in 2003. Iraq has the world's third-largest proven oil reserves.
CNPC, the parent company of PetroChina and Asia's biggest oil and gas company, has not given any indication of a delay. Shahristani said production would start at 25,000 barrels per day (bpd) within three years from now, increasing to 115,000 in the sixth year of the contract.
Iraq toughened its terms in renegotiating the CNPC deal, changing the contract to a set-fee service deal from the oil production-sharing agreement signed under Saddam.
CNPC will get $6 for every barrel produced, regardless of the oil price, during the initial phases, Shahristani said. Once production is maximized in the sixth year, that fee falls to $3 per barrel, he added.
"During the period of the contract, world oil prices might double, but their fee will remain unchanged," Shahristani said.
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.
The Ahdab field is in Wasit province, south of Baghdad and bordering Iran.
Iraq opened its doors to foreign companies in a bidding round for eight oil fields and two gas fields at the end of June. Ahdab was not included in that round.
Shahristani told Iraqiya only 27 of Iraq's 80 proven oil and gas fields were currently producing and all of the remaining ones would be opened to investors in bidding rounds during the next year. He did not give precise dates.
The Iraqi government said last week it had approved the contract between Iraq's North Oil Company and the Chinese National Petroleum Company (CNPC).
"We have asked the Chinese company to start developing the al-Ahdab field immediately. It ... should start the field work within two months, otherwise the contract will be cancelled," Oil Minister Hussain al-Shahristani told state-owned Iraqiya television in a pre-recorded interview broadcast on Sunday.
He said Iraq's insecurity would not be an excuse for failing to start work on time.
The Iraqi government renegotiated the deal from one originally signed in 1997.
It marks Iraq's first major oil contract with a foreign firm since U.S.-led forces ousted Saddam Hussein in 2003. Iraq has the world's third-largest proven oil reserves.
CNPC, the parent company of PetroChina and Asia's biggest oil and gas company, has not given any indication of a delay. Shahristani said production would start at 25,000 barrels per day (bpd) within three years from now, increasing to 115,000 in the sixth year of the contract.
Iraq toughened its terms in renegotiating the CNPC deal, changing the contract to a set-fee service deal from the oil production-sharing agreement signed under Saddam.
CNPC will get $6 for every barrel produced, regardless of the oil price, during the initial phases, Shahristani said. Once production is maximized in the sixth year, that fee falls to $3 per barrel, he added.
"During the period of the contract, world oil prices might double, but their fee will remain unchanged," Shahristani said.
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.
The Ahdab field is in Wasit province, south of Baghdad and bordering Iran.
Iraq opened its doors to foreign companies in a bidding round for eight oil fields and two gas fields at the end of June. Ahdab was not included in that round.
Shahristani told Iraqiya only 27 of Iraq's 80 proven oil and gas fields were currently producing and all of the remaining ones would be opened to investors in bidding rounds during the next year. He did not give precise dates.
