• PetroChina Will Join in Developing Iraq Oilfield

PetroChina Will Join in Developing Iraq Oilfield

PetroChina, biggest energy firm in China, will join Exxon Mobil in exploiting the large West Qurna oilfield in Iraq, and now it is having a conversation with Lukoil for the purchase of a second project at the field, said industry sources on Friday.
China has already become the foremost foreign player in developing Iraq’s southern oilfield, and its competitive advantage will be improved by the deal at West Qurna, so that PetroChina will become the biggest single foreign investor.
PetroChina collaborates with BP at Rumaila, Iraq's biggest oilfield, and conducts the operation of the Halfaya field. The company was the first foreign firm to win a deal for oil services in Iraq after the former president Saddam Hussein was overthrown by US-led forces.
An industry source with direct knowledge of the deal with Exxon has announced that PetroChina will join the development of this oilfield.
The agreement would be disclosed in weeks, the source said, but refused to give much more details on how the two most valuable listed energy firms in the world would work together in Iraq. Both PetroChina and Exxon refused to answer any question about it.
Exxon holds a 60 per cent stake in West Qurna 1, a $50 billion investment project pumping around 480,000 barrels per day (bpd).
In March, PetroChina's ex-chairman Jiang Jiemin told Reuters that the Chinese energy major was willing to cooperate with Exxon at West Qurna.
PetroChina is also deliberating with Lukoil over joining a second development project at the field, West Qurna-2, a Lukoil source said. That source also declined to give any details on the size of the stake which is now being discussed.
“Lukoil bosses have already said they would prefer an Asian partner, a Chinese partner, in the project to secure a guaranteed market for oil sales," the source said.
Lukoil's Chief Executive Vagit Alekperov has declared that the company was willing to have a Chinese firm as a replacement of Norway's Statoil at that project. Last year, Statoil has agreed in selling its 18.75 per cent stake.
China is the world's second-largest oil importer, behind the United States, and it is constantly increasing in fuel consumption which has improved global oil demand growth for ten years.
Faced with falling demand for imported oil in the United States and Europe, oil producers from the Middle East, Russia, Africa and Latin America are all competing for a bigger share of China's growing market.
West Qurna-2 is estimated to be capable to produce 500,000 bpd in 2014, demanding total investment of $30 billion. Lukoil will invest $5 billion in the project in 2013 alone in accordance with the plan.
Last year, Exxon agreed to sell its stake in the southern Iraq West Qurna-1 oilfield after arguing with Baghdad over contracts it signed with autonomous Kurdistan in the north, deals the central government rejects as illegal.
According to a source familiar with PetroChina operations in Iraq, the two companies were in talks over a deal that would help Exxon to maintain its status as operator at the oilfield, where Royal Dutch Shell is minority partner with 15 per cent.
Some industry sources thought that it was improbable that PetroChina would buy stakes in both projects, on account of their sheer size and scale.
However, the oilfields in Iraq are the largest oilfields open to foreign investment in the Middle East, which it’s hard for PetroChina to resist with the rising of China's dependency on imports.
As a second industry official, who has inside information of PetroChina's investment strategy abroad said, PetroChina is under big pressure of adding output and reserving for its size.
The second industry official added, "Iraq, given its attractive contract terms, was among the brightest spots for PetroChina's international operations over the past three years, working shoulder by shoulder with global oil majors."
Exxon and PetroChina said they had agreed in a separate deal in late July to study the 3,830 sqare-kilometre Changdong block together in northern China's Ordos basin, which industry officials described as a tight gas play.
An Exxon media official in Beijing had said in an email on Thursday that Exxon Mobil is expecting to successful implementation of the JSA, which would lead to discussion and execution of a Production Sharing Contract for the block.
Having developed tight gas in the Ordos basin, Exxon joined Shell and Total.
This would be the second time for a U.S. firm to obtain joint study deal with PetroChina. At one time the companies had agreed to study a shale block in southwestern China's Sichuan province.
(Edited by Jeasin)


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