PetroChina signs agreement to help develop oilfield in Iraq

PetroChina has signed a final agreement on a tender it won to help develop the Halfaya oilfield in Iraq, the second major oil deal it has secured in the Middle Eastern nation in the last six months.

The firm signed a 20-year service contract for the field's development and production on Wednesday.

PetroChina has a 37.5 per cent interest in the project, while Iraq's state-owned South Oil has 25 per cent and France's Total and Malaysia's Petronas each hold 18.75 per cent.

South Oil was absent from the preliminary contract signed late last month, with PetroChina holding a 50 per cent interest and Total and Petronas each with 25 per cent.

The field, located in southeast Iraq, is estimated to have recoverable oil reserves of 4.1 billion barrels. The investors have undertaken to raise its output to 535,000 barrels a day from 3,100 barrels a day, PetroChina said, without giving a time frame.

A company spokesman declined to disclose further financial details or to explain what services PetroChina and the other investors would provide. Reuters quoted Iraq's oil ministry as saying that PetroChina and its partners will be paid US$1.40 for each barrel of output, and will have to pay a non-recoverable signature bonus of US$150 million.

Mirae Asset Securities head of energy research Gordon Kwan believes the deal will have limited earnings impact for PetroChina, since the US$1.40 per barrel service fee is 'razor thin', given the political risks of operating in Iraq. PetroChina makes a profit of more than US$30 a barrel from its existing oil projects.