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UPDATE 1-CNPC, not BP, to take majority of Iraq field-sources

Published: 24 Jul 2009 03:13:33 PST

BEIJING/DUBAI, July 24 - China National Petroleum Corp (CNPC) is to take the majority stake from BP in a project to develop the Rumaila oilfield in Iraq, industry sources said on Friday.

The sources said BP will remain part the project, which was awarded to develop the 17-billion-barrel southern Rumaila field in a bidding round at the end of June, but not with the majority stake under its initial bid made in partnership with CNPC.

A BP spokesman declined to comment on any changes in the company's stake but said it was proceeding with the finalisation of the contract.

"We won the bid and we're now moving towards finalisation of the contract," said Toby Odone, a London-based BP spokesman.

The contract for development of Iraq's largest oilfield was the only one awarded out of eight that had been on offer.

Analysts say the upstream Iraqi oil industry offers a unique opportunity to tap onshore oil reserves.

Iraq has the world's third-largest proven oil reserves, estimated at 115 billion barrels, but its petroleum industry has been devastated by years of war and international sanctions.

But BP accepted less favourable terms than it had wanted to get the contract for Rumaila. The original winner of the bidding for the field, an Exxon Mobil-led alliance, had rejected the Iraqi Oil Ministry's maximum proposed per barrel fee for the contract, giving the BP group an opening to take it on.

A senior oil industry executive who works for a company that bid in the Iraqi auction last month said BP wanted to lower its exposure to risk in Iraq.

"I think BP still wants to be the operator of the field, even if it has a lower stake," said the executive, who declined to be identified.

A Chinese oil industry source said Chinese companies might have a cost edge over their Western counterparts. To compensate for not very attractive terms, Chinese companies would be able to use their own service teams to develop the field to lower costs.

"Terms that are bad for BP are not necessarily bad for Chinese companies," the source said. "CNPC has never seen a better field than this one."