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. The deal is expected to provide up to US$100 million of additional pre-tax profit for PetroChina annually, which is less than 1 per cent of its estimated net profit of US$17 billion for last year, Kwan added. 'But then, this deal could be a strategic stepping stone project for PetroChina to fast track [its] access to other exploration prospects in Iraq, one of the last frontiers for oil companies to boost their production and reserves in the longer term,' he said. PetroChina last June won a tender with Britain's BP for the 20-year development of the Rumaila oilfield in Iraq. It was part of the first round of bidding for Iraqi fields, while Halfaya is part of the second, involving 10 fields. Iraq is seeking to become one of the world's three biggest oil producers, with a goal to increase daily output capacity in seven years to 12 million barrels from the current 2.5 million barrels per day. Separately, the chairman of PetroChina's subsidiary, CNPC (HK), Li Hualin, said after a special shareholders' meeting that the company plans to spend 10 billion yuan (HK$11.38 billion) to develop its natural gas distribution business. It also plans to spend four billion yuan to build two factories in Wuhai, Inner Mongolia, to turn waste gas generated from coke production into liquefied natural gas and pipe it to users. Coke is used in steel production. Li estimated the project will generate a return rate of 12 per cent. CNPC (HK), which owns stakes in various mainland and overseas oilfields, also plans to buy its parent's new energy and gas distribution assets, he said. New frontier The deal is PetroChina's second major contract in Iraq in six months The Halfaya field is estimated to have recoverable oil reserves of, in barrels: 4.1b
