PetroChina to join Exxon on giant Iraq oilfield

Oil company's deal will reinforce China's dominant position in oilfields of southern Iraq

PUBLISHED : Saturday, 10 August, 2013, 12:00am
UPDATED : Tuesday, 03 September, 2013, 1:03pm

China's biggest energy firm PetroChina will join ExxonMobil in developing Iraq's giant West Qurna oilfield and is in talks with Lukoil to buy into a second project at the field, industry sources said.

China is already the top foreign player in Iraq's southern oilfields and a deal at West Qurna would boost its dominance and could make PetroChina the biggest single foreign investor.

PetroChina partners BP at Rumaila, Iraq's biggest oilfield, and operates the Halfaya field. The company was the first foreign firm to sign an oil service deal in Iraq after United States-led forces toppled former president Saddam Hussein.

"PetroChina will participate in developing the field," said an industry source with direct knowledge of the deal with Exxon.

The agreement would be announced in weeks, the source said, but declined to give further details on how the world's two most valuable listed energy firms would work together in Iraq. Both PetroChina and Exxon declined to comment.

Exxon holds a 60 per cent stake in West Qurna 1, a US$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 team up with Exxon at West Qurna.

PetroChina is also in talks with Lukoil for a stake in another development project at the field, West Qurna-2, a Lukoil source said. That source also declined to give details on the size of the stake under discussion.

"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 said that the company wanted a Chinese firm to replace Norway's Statoil at the project. Statoil agreed last year to sell its 18.75 per cent stake.

China is the world's second-largest oil importer after the US, and its growth in fuel consumption has driven global oil demand growth for a decade.

Faced with falling demand for imported oil in the US 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 expected to produce 500,000 bpd in 2014, and need total investment of US$30 billion. Lukoil plans to invest US$5 billion in the project in 2013 alone.

Last year, Exxon offered to sell its stake in the southern Iraq West Qurna-1 oilfield after a dispute with Baghdad over contracts it signed with autonomous Kurdistan in the north, deals the central government rejects as illegal.

A source familiar with PetroChina operations in Iraq said in March the two companies were discussing a deal that would enable Exxon to retain operator status at the oilfield, where Royal Dutch Shell is minority partner with 15 per cent.

Some industry sources said it was unlikely that PetroChina would buy stakes in both projects, due to their sheer size and scale.