Iraqi government approves CNPC, BP oil deal

The Iraqi cabinet announced Sunday that it has approved the deal for China National Petroleum Corporation (CNPC), China's largest oil and gas producer, to cooperate with UK oil giant BP to develop Rumaila, Iraq's largest oil field.

CNPC and BP won the contract to invest and develop in Rumaila in a June 30 bid.

Rumaila has oil reserves of 17.8 billion barrels and the current output capacity is about 1 million barrels per day. With CNPC and BP's investment, the output capacity per day is expected to reach 2.8 million barrels.

According to the technical service contract, CNPC and BP will conduct oil exploration with the Iraqi government paying them a remuneration fee, but the two companies do not own the oil. Meanwhile, the fee will only be paid once a production expectation of 2.85 million barrels of output capacity per day set by the government is reached. The amount that exceeds the 2.85 million barrel output capacity per day will be charged $2 per barrel as a technical remuneration fee. The 20-year contract also has a possible five-year extension in the future.

CNPC and BP will begin operations in the oil field in November.

Iraq is one of the few areas in the world that is rich in oil and gas reserves, but not mature in the exploration of these resources. According to reports from www.ce.cn, the cost of oil exploration in Iraq is much lower than those in China. The daily oil output capacity in Iraqi oil fields may reach more than 10 million barrels after efforts like those by CNPC and BP are made in the future.

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