News / Middle East

    Iraq Embraces China's Growing Oil Dominance

    FILE - An aerial view of excess gas burning off at the al-Ahdab oil field in Wasit province, Iraq.
    FILE - An aerial view of excess gas burning off at the al-Ahdab oil field in Wasit province, Iraq.
    Reuters
    From the giant southern oilfields to the lively souks of Basra, China is drilling ever deeper into Iraq.

    Driven by an insatiable thirst for oil, Beijing secured a formidable position in Iraq's prized energy sector through auctions held four years ago. It is now seeking to buy 850,000 barrels per day (bpd) of Iraqi oil, 30 percent of estimated 2014 exports.

    Its dominant role in Iraqi oilfields sat uneasily with Baghdad at first. That changed when China's quick, cost-effective ramp-up in production helped push Iraq up the OPEC ranks to second spot behind Saudi Arabia from a virtual standing start after the disruptions of the U.S.-led invasion in 2003.

    “The Chinese are our commercial partners in managing and developing oilfields that are totally Iraqi. So I don't see any issue of dominance or threats,” said Thamir Ghadhban, chairman of the advisory commission to Iraq's Council of Ministers.

    “It's the other way around. I think the Chinese find Iraq to be their favorite partner.”

    Further expansion is in the works.

    PetroChina's anticipated purchase of a 25 percent share in Exxon Mobil's West Qurna-1 oilfield project will allow China's biggest energy firm to overtake Russia's Lukoil to become the biggest single foreign investor in Iraqi oil.

    Cheap and silent

    “China's strong position means the oil ministry has fewer qualms if Western companies back out because they are seen as being more readily replaceable,” said an Iraqi analyst.

    PetroChina already partners with BP at Rumaila, Iraq's largest producer, and operates the Halfaya and al-Ahdab fields. It was the first foreign firm to sign an oil service deal in Iraq after U.S.-led forces toppled Saddam Hussein.

    Deep pockets and corporate flexibility in the face of rising violence here in Iraq allows companies from China to offer the rapid production increases that many in the West cannot.

    “The Chinese work cheaply and silently - worrying less about security compared to other foreign firms. They use a larger number of workers, so they always complete the job on time, if not before,” said an official with Iraq's South Oil Co (SOC).

    “When we advise other contractors, or even our own workers, on how to get the job done, we tell them, 'Do it like the Chinese'.”

    Baghdad has been particularly struck with PetroChina's performance at Halfaya in the southern Maysan province.

    Along with partners Total and Petronas, PetroChina has lifted flows from the field, which was nearly untapped, above 100,000 bpd, and output is expected to hit 200,000 bpd by next September.

    PetroChina's peers Sinopec and China National Offshore Oil Corp (CNOOC) are also on the ground, giving Beijing access to the whole of Iraq - from the autonomous Kurdish region in the north to the Maysan oilfield in the south.

    They, along with all the foreign oil companies who signed service contracts with Baghdad, are repaid for development with a cut of the oil their work produces.

    Beijing, which last month overtook the United States as the world's largest oil importer, is seeking 70 percent more Iraqi oil next year.

    Saudi Rivalry

    The higher oil sales are bound to step up the rivalry between Baghdad and top exporter Saudi Arabia for a bigger slice of the growing Asian market.

    “Iraq's natural market is Asia, and with China's strong economy it's natural that it would lift more and more Iraqi crude and invest heavily to get the resources,” said a Western diplomat.

    “And their partnerships with Western companies are important: they're being exposed to our business culture and moving in a manner that we want to see.”

    Oil executives point to BP's venture with PetroChina, which has raised output by about 400,000 bpd to 1.4 million bpd, as a prime example of a smoothly running partnership.

    “PetroChina brings its own capabilities and the opportunity, under competitive bidding, to access the Chinese supply chain,” said Toby Odone, Deputy Head of BP's press office.

    Iraq's easy-to-access oilfields are the largest in the Middle East open to foreign investment, making them hard to resist as China's dependency on imports rises.

    “The Chinese are reliable. They don't have the experience of running sophisticated projects, but drilling here is very easy,” said a senior Western oil executive.

    Iraq has the world's fifth-largest oil reserves and wants to at least double its production of 3 million barrels bpd in the next few years and ultimately challenge Saudi Arabia as the world's biggest oil power.

    For China, access to reserves is a strategic imperative. And Beijing is prepared to accept tougher terms and lower profits than Western oil majors and even Russian firms such as Lukoil, which have to answer to shareholders.

    “China's expansion in Iraq is still largely driven by economics. There is little political thinking behind it,” said Chen Weidong, head of energy strategy research at CNOOC.

    That drive has taken China beyond the oilfields and into the streets of Basra, where the Chinese are setting up shop.

    “The Chinese are part of our society. They are not  strangers. Their presence here in Basra makes us feel that our city is secure,” said Ali Sa'adi, the 34-year-old owner of a mobile phone shop.

    “I'm happy they are here, despite the competition.”

    You May Like

    Native Americans Ask: What About Our Water Supply?

    They say they have been facing a dangerous water contaminant for decades - uranium – but the problem has received far less attention than water contamination by lead in Flint, Michigan

    Pakistan's President Urges Nation Not to Celebrate Valentine's Day

    Mamnoon Hussain criticizes Valentine's Day, which falls on Sunday this year, as a Western import that threatens to undermine the Islamic values of Pakistan

    Mother of IS Supporter: Son Was Peaceful, 'Role Model'

    Somali-American Abdirizak Mohamed Warsame pleaded guilty Thursday to charges of conspiring to provide material support to Islamic State militants

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Two-thirds of World Faces Water Shortagei
    X
    February 12, 2016 7:31 PM
    Four billion people — or two out of every three on the planet — do not have enough water to meet their basic needs. That is far greater than previously thought, according to a new study that presents a more accurate picture of the problem. As VOA's Rosanne Skirble reports, the findings will help policymakers and the public craft solutions to address the threat.
    Video

    Video Two-thirds of World Faces Water Shortage

    Four billion people — or two out of every three on the planet — do not have enough water to meet their basic needs. That is far greater than previously thought, according to a new study that presents a more accurate picture of the problem. As VOA's Rosanne Skirble reports, the findings will help policymakers and the public craft solutions to address the threat.
    Video

    Video Gateway to Mecca: Historical Old Jeddah

    Local leader Sami Nawar's family has been in the Old City of Jeddah for hundreds of years and takes us on a tour of this ancient route to Mecca, also believed to be the final resting place of Adam's wife, Eve.
    Video

    Video New Technology Aims to Bring Election Transparency to Uganda

    A team of recent graduates from Uganda’s Makerere University has created a mobile application designed to help monitor elections and expose possible rigging. The developers say the app, called E-Poll, will make Uganda's democratic process fairer. From Kampala, VOA's Serginho Roosblad reports.
    Video

    Video As Refugees Perish, Greek Graveyards Fill

    Aid workers on the Greek island of Lesbos say they are struggling to bury the increasing number of bodies of refugees that have been recovered or washed up ashore in recent months.  The graveyards are all full, they say, yet as tens of thousands of people clamor to get out of Syria, it is clear refugees will still be coming in record numbers. For VOA, Hamada Elrasam reports from Lesbos, Greece.
    Video

    Video Russia Bristles at NATO Expansion in E. Europe

    Russian Foreign Minister Sergei Lavrov is meeting Friday with the head of NATO after the Western military alliance and the United States announced plans for the biggest military build-up in Europe since the Cold War. Russia has called NATO's moves a threat to stability in Europe. But NATO says the troop rotations and equipment are aimed at reassuring allies concerned about Russia as VOA's Daniel Schearf reports from Moscow.
    Video

    Video To Fight Zika, Scientists Target Mosquitoes

    Mosquitoes strike again. The Zika virus outbreak is just the latest headline-grabbing epidemic carried by these biting pests, but researchers are fighting back with new ways to control them. VOA's Steve Baragona takes a look.
    Video

    Video Mosul Refugees Talk About Life Under IS

    A top U.S. intelligence official told Congress this week that a planned Iraqi-led operation to re-take the city of Mosul from Islamic State militants is unlikely to take place this year. IS took over the city in June 2014, and for the past year and a half, Mosul residents have been held captive under its rule. VOA's Zana Omar talked to some families who managed to escape. Bronwyn Benito narrates his report.
    Video

    Video Scientists Make Progress Toward Better Diabetes Treatment, Cure

    Scientists at two of the top U.S. universities say they have made significant advances in their quest to find a more efficient treatment for diabetes and eventually a cure. According to the International Diabetes Federation, the disease affects more than 370 million people worldwide. VOA’s George Putic reports.
    Video

    Video NATO to Target Migrant Smugglers

    NATO has announced plans to send warships to the Aegean Sea to target migrant smugglers in the alliance's most direct intervention so far since a wave of people began trying to reach European shores.
    Video

    Video Russia's Catholics, Orthodox Hopeful on Historic Pope-Patriarch Meeting

    Russia's Catholic minority has welcomed an historic first meeting Friday in Cuba between the Pope and the Patriarch of Russia's dominant Orthodox Church. The Orthodox Church split with Rome in 1054 and analysts say politics, both church and state, have been driving the relationship in the centuries since. VOA's Daniel Schearf reports from Moscow.
    Video

    Video Used Books Get a New Life on the Streets of Lagos

    Used booksellers are importing books from abroad and selling them on the streets of Africa's largest city. What‘s popular with readers may surprise you. Chris Stein reports from Lagos.
    Video

    Video After NH Primaries All Eyes on South Carolina

    After Tuesday's primary in New Hampshire, US presidential candidates swiftly turned to the next election coming up in South Carolina. The so-called “first-in-the-South” poll may help further narrow down the field of candidates. Zlatica Hoke reports.
    Video

    Video Smartphone Helps Grow Vegetables

    One day, you may be using your smartphone to grow your vegetables. A Taipei-based company has developed a farm cube — a small, enclosed ecosystem designed to grow plants indoors. The environment inside is automatically adjusted by the cube, but it can also be controlled through an app. VOA's Deborah Block has more on the gardening system.
    Video

    Video Exhibit Turns da Vinci’s Drawings Into Real Objects

    In addition to being a successful artist, Renaissance genius Leonardo da Vinci designed many practical machines, some of which are still in use today, although in different forms. But a number of his projects were never realized — until today. VOA’s George Putic reports.