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

    In Britain, The Sun Still Doesn’t Shine

    Invoking Spitfires and Merlin, Leave voters insist country can be great again, following surprising 'Brexit' vote last week

    Double Wave of Suicide Bombings Puts Lebanon, Refugees on Edge

    Following suicide bombings in Christian town of Al-Qaa, on Lebanon's northeast border with Syria, fears of further bombings have risen

    US Senators Warned on Zika After Failing to Pass Funding

    Zika threats and challenges, as well as issues of contraception and vaccines, spelled out as lawmakers point fingers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Slow Rebuilding Amid Boko Haram Destruction in Nigeria’s Northeasti
    X
    June 29, 2016 6:15 PM
    Military operations have chased Boko Haram out of towns and cities in Nigeria’s northeast since early last year. But it is only recently that people have begun returning to their homes in Adamawa state, near the border with Cameroon, to try to rebuild their lives. For VOA, Chris Stein traveled to the area and has this report.
    Video

    Video Slow Rebuilding Amid Boko Haram Destruction in Nigeria’s Northeast

    Military operations have chased Boko Haram out of towns and cities in Nigeria’s northeast since early last year. But it is only recently that people have begun returning to their homes in Adamawa state, near the border with Cameroon, to try to rebuild their lives. For VOA, Chris Stein traveled to the area and has this report.
    Video

    Video Clinton Leads Trump, But Many Voters Don't Like Either

    In the U.S. presidential race, most recent polls show Democrat Hillary Clinton with a steady lead over Republican Donald Trump as both presumptive party nominees prepare for their party conventions next month. Trump’s disapproval ratings have risen in some recent surveys, but Clinton also suffers from high negative ratings, suggesting both candidates have a lot of work to do to improve their images before the November election. VOA National correspondent Jim Malone has more from Washington.
    Video

    Video New US Ambassador to Somalia Faces Heavy Challenges

    The new U.S. envoy to Somalia, who was sworn into office Monday, will be the first American ambassador to that nation in 25 years. He will take up his post as Somalia faces a number of crucial issues, including insecurity, an upcoming election, and the potential closure of the Dadaab refugee camp in Kenya. VOA’s Jill Craig asked Somalis living in Kenya’s capital city Nairobi how they feel about the U.S. finally installing a new ambassador.
    Video

    Video At National Zoo, Captivating Animal Sculptures Illustrate Tragedy of Ocean Pollution

    The National Zoo in Washington, D.C., is home to about 1,800 animals, representing 300 species. But throughout the summer, visitors can also see other kinds of creatures there. They are larger-than-life animal sculptures that speak volumes about a global issue — the massive plastic pollution in our oceans. VOA's June Soh takes us to the zoo's special exhibit, called Washed Ashore: Art to Save the Sea.
    Video

    Video Baghdad Bikers Defy War with a Roar

    Baghdad is a city of contradictions. War is a constant. Explosions and kidnappings are part of daily life. But the Iraqi capital remains a thriving city, even if a little beat up. VOA's Sharon Behn reports on how some in Baghdad are defying the stereotype of a nation at war by pursuing a lifestyle known for its iconic symbols of rebellion: motorbikes, leather jackets and roaring engines.
    Video

    Video Melting Pot of Immigrants Working to Restore US Capitol Dome

    The American Iron Works company is one of the firms working to renovate the iconic U.S. Capitol Dome. The company employs immigrants of many different cultural and national backgrounds. VOA’s Arman Tarjimanyan has more.
    Video

    Video Testing Bamboo as Building Material

    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Orphanage in Iraqi City Houses Kids Who Lost their Parents to Attacks by IS

    An orphanage in Iraqi Kurdistan has become home to scores of Yazidi children who lost their parents after Islamic State militants took over Sinjar in Iraq’s Nineveh Province in 2014. Iraqi Kurdish forces backed by the U.S. airstrikes have since recaptured Sinjar but the need for the care provided by the orphanage continues. VOA’s Kawa Omar filed this report narrated by Rob Raffaele.
    Video

    Video Re-Opening Old Wounds in a Bullet-Riddled Cultural Landmark

    A cultural landmark before Lebanon’s civil war transformed it into a nest of snipers, Beirut’s ‘Yellow House’ is once again set to play a crucial role in the city.  Built in a neo-Ottoman style in the 1920s, in September it is set to be re-opened as a ‘memory museum’ - its bullet-riddled walls and bunkered positions overlooking the city’s notorious ‘Green Line’ maintained for posterity. John Owens reports from Beirut.
    Video

    Video Brexit Resounds in US Presidential Contest

    Britain’s decision to leave the European Union is resounding in America’s presidential race. As VOA’s Michael Bowman reports, Republican presumptive nominee Donald Trump sees Britain’s move as an affirmation of his campaign’s core messages, while Democrat Hillary Clinton sees the episode as further evidence that Trump is unfit to be president.
    Video

    Video NASA Juno Spacecraft, Nearing Jupiter, to Shed Light on Gas Giant

    After a five-year journey, the spacecraft Juno is nearing its destination, the giant planet Jupiter, where it will enter orbit and start sending data back July 4th. As Mike O'Sullivan reports from Pasadena, California, the craft will pierce the veil of Jupiter's dense cloud cover to reveal its mysteries.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.

    Special Report

    Adrift The Invisible African Diaspora