China willing to join Exxon at giant Iraq oilfield

BEIJING Tue Mar 5, 2013 10:52am EST

The Belgian headquarters of oil giant ExxonMobil, where Britain's Nicholas Mockford worked, is pictured in Machelen, northern Brussels, October 27, 2012. REUTERS/Sebastien Pirlet

The Belgian headquarters of oil giant ExxonMobil, where Britain's Nicholas Mockford worked, is pictured in Machelen, northern Brussels, October 27, 2012.

Credit: Reuters/Sebastien Pirlet

Related Topics

BEIJING (Reuters) - China is willing to join Exxon Mobil in a giant Iraqi oilfield project, a top executive said on Tuesday, which could see Beijing come to dominate Iraq's oilfields and help the U.S. major mend fences with Baghdad.

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

By the end of December, the China National Petroleum Corp (CNPC) had emerged as the frontrunner to take over Exxon's 60 percent share.

But now Iraqi Prime Minister Nuri al-Maliki is working to keep the U.S. oil giant on side, industry sources say, offering much sweeter terms at West Qurna-1 - a $50 billion investment project and a greater potential prize than the Kurdish blocks if Baghdad structures the contract closer to the more lucrative Kurdish model.

Exxon is setting up a range of options, the sources say, including the possibility of selling just part of its 60 percent stake in West Qurna-1 to PetroChina (0857.HK) (601857.SS), the listed arm of CNPC.

Jiang Jiemin, PetroChina's Chairman, told Reuters that China's largest oil and gas producer is prepared to team up with Exxon at the field, now pumping in excess of 400,000 barrels per day (bpd).

"We are willing to jointly develop the project with Exxon Mobil. Exxon Mobil welcomed our participation and the Iraqi government also supports us joining the development," Jiang said on the sidelines of the annual parliamentary session in Beijing.

He said PetroChina would "thoroughly evaluate the project" and make an investment decision at an "appropriate" time.

"The asset value of the whole project is massive, but near-term capital spending required is not that huge," said Jiang, adding that parties have yet to discuss the size of stakes to be shared.

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

CNPC made a play for Exxon's full stake in West Qurna-1 at the end of last year, but the U.S. company was not satisfied with the bid, according to industry sources.

Asked if PetroChina is aware of Baghdad trying to keep Exxon in the project, Jiang said: "Iraq has its own bottom lines. If Exxon continues with its new projects in the Kurdistan region, its operations in Iraq will face some difficulties".

Exxon was the first major oil company to sign agreements with the government of the autonomous Kurdistan region, a move that increased tension between Baghdad and the Kurds in a long-running dispute over oil, territory and political autonomy.

Baghdad says any deals signed with Kurdistan are illegal, but the government of Kurdistan says the constitution allows it to sign oil agreement without permission from the central government.

PetroChina, the first foreign oil company to sign an oil service deal in Iraq after the toppling of its former president Saddam Hussein, already has a formidable position in Iraq's prized southern oilfields.

It is in charge at Halfaya and partners BP (BP.L) at Rumaila, Iraq's biggest oilfield.

Iraq has the world's fourth largest oil reserves and wants to at least double it production in the next few years. Now pumping just over 3 million bpd, it ranks as the second biggest producer behind Saudi Arabia in the Organization of the Petroleum Exporting Countries.

(Reporting by Chen Aizhu; Editing by Peg Mackey and William Hardy)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (1)
MikeBarnett wrote:
Iraq wants to keep ExxonMobil to prevent one foreign investor, China, from gaining nearly complete control. However, US firms should not make contracts that may open a new front in an ongoing civil war. Countries that have emerged from colonial rule will not allow foreign firms to reestablish that control. China’s “Century of Humiliation” by others has made them more sensitive than the US to issues of respect in some resource rich lands. Therefore, China has made no deal with the Kurds that put ExxonMobil at risk, and China agreed to work with ExxonMobil when Iraq expressed this desire to balance oil developers.

For example, if British Petroleum, a firm from the former colonial master of the US, offered deals for petroleum product output from Texas and Alaska to be sold in Britain, how would the US feel about that? Remember that Governor Rick Perry suggested that Texas should secede; the Republic of Texas movement has been active for decades; and Alaska is adjacent to a British Commonwealth country, Canada.

Mar 05, 2013 1:52pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.