China, not Cheney, is now big player in Iraq's oil

Attention Dick Cheney: Anyone who thought that by invading Iraq the U.S. would get a lock on Iraq's oil has another think coming.

Yesterday, Iraq’s cabinet approved a deal with the China National Petroleum Corporation and BP (British Petroleum) to develop Iraq’s largest oil field. CNPC is China’s biggest oil company.

The Rumaila oil field, near the city of Basra in southern Iraq, has proven reserves of more than 17 billion barrels, constituting around 15 percent of Iraq’s oil resources. Experts say it is one of the biggest oil fields in the world.

The CNPC-BP consortium was among 32 foreign bidders for eight oil development contracts at an auction held by Iraq’s Oil Ministry June 30. Bidders included transnational oil giants like Exxon Mobil, Chevron, ConocoPhillips, Shell, Lukoil, Japex, Total and the Korea Gas Corporation. The Chinese-British bid was the only one that accepted the Oil Ministry's terms, which offered the foreign ventures far less money per barrel of oil produced than the other oil firms apparently considered acceptable.

“The BP-CNPC coalition will raise the field’s production from 950,000 to 2.85 million barrels per day,” Oil Ministry spokesperson Ali al-Dabbagh said in a statement reported by the Aswat al-Iraq news agency. The bulk of the new oil will be produced by the Chinese firm, Oil Minister Hussein al-Shahrestani said.

The CNPC-BP venture had been seeking to be paid $3.99 a barrel, but agreed to accept the Iraqi ministry’s $2 fee. Exxon Mobil dropped out of the auction rather than lower its reported bid of $4.80 a barrel, according to Oil Change International, a group that targets the oil industry as a political barrier to a clean energy world.

The Chinese-British consortium has probably been willing to accept the slightly less favorable terms offered by the ministry “because Iraqi oil offers such vast potential,” Oil Change says. Rumaila is “a huge elephant … but there could be much, much more.”

The June 30 auction was Iraq’s first oil and gas field offering to international companies in nearly three decades.

The move drew some opposition in Iraq. The Oil Unions Federation in Basra said Iraq’s oil fields could be developed without outside help. The director general of the state-run South Oil Company sent a memo to Shahrestani before the auction objecting to the length of the proposed 20-year deals and arguing that government-run oil companies are already doing much of the same work and only need technical help from foreigners.

Others say Iraq does not have the funds and technical wherewithal to repair and modernize its crumbled pipelines and other oil infrastructure.

Iraq is heavily dependent on oil revenues to rebuild its economy and improve the lives of the people, now suffering massive unemployment and deprivation.

The projected increase in oil production from the CNPC-BP deal would provide an extra $1.7 trillion for Iraq over the next 20 years, Iraqi officials say.

This is not the first Chinese venture into Iraq. A year ago China and Iraq signed a $3 billion deal to develop the Adhab oil field in southeastern Iraq. The China National Petroleum Corporation started drilling there this spring.

China’s refining giant Sinopec offered $7.22 billion last month to buy Addax Petroleum, a Swiss-Canadian company with operations in Iraq’s Kurdistan region. Addax has oil licenses in two oil fields in northern Iraq, both near Kirkuk, and its drilling has already struck large quantities of oil repeatedly in the Taqtaq field, The New York Times reports.

Meanwhile, a Russian company is negotiating a contract with Iraq to work on the Kirkuk-Baniyas pipeline which carries oil from Iraq’s Kirkuk oil field to the Syrian port of Baniyas. In April, Syria’s prime minister, in his first visit to post-Saddam-Hussein Iraq, concluded an agreement with Iraqi officials to reopen the pipeline, which was badly damaged by U.S. airstrikes during the 2003 invasion and has been out of commission since then.

Iraq and Syria are also talking about building a natural gas pipeline from Iraq’s Western Akkas fields to Syria, the Niqash web site reports.

But China is clearly emerging as a major player in Iraq’s oil scene. Once an exporter of oil, China is now dependent on imports for more than half its oil.

“As the world’s second-largest and fastest-growing consumer of oil, China is showing increasing interest in oil fields in a country that has until very recently seemed to be firmly in the American sphere of influence for natural resources: Iraq,” writes New York Times business reporter Keith Bradsher.

“After six years of war, few Americans or Iraqis may have expected China to emerge as one of the winners in Iraqi oil,” Bradsher writes. But signs of improving security in Iraq, and the June 30 U.S. military pullback from Iraqi cities “just happen to coincide with an aggressive Chinese push to buy or develop overseas oil fields.”

It’s looking more and more like Dick Cheney and his Texas oil crowd are on the losing side of history.

suewebb @ pww.org