Official: Iraq, China finalize oil service deal to develop southern Iraqi field

By SAMEER N. YACOUB , Associated Press

Last update: November 11, 2008 - 9:00 AM


BAGHDAD, - Iraq and China have signed the final agreement on a $3 billion deal to develop the Ahdab oil field south of Baghdad over a 22 year-period, an Oil Ministry official said Tuesday.

An initial agreement was signed in Beijing last August, restoring a Saddam Hussein-era deal that was canceled after the 2003 U.S.-led invasion of Iraq.

The agreement was finalized on Monday at a ceremony in Baghdad, the official said on condition of anonymity because he was not authorized to speak to media.

Reporters were not invited to the ceremony for security reasons, he added.

The new agreement is the first Saddam-era oil deal to be honored by the new Iraqi government.

The deal provides for a service contract, under which China will not be a partner in profits and instead will be paid for its work in the Ahdab field. The oil field is located in Wasit province about 100 miles southeast of Baghdad.

It has been the scene of sporadic attacks since the U.S.-led invasion in 2003.

The official said as a start the field will produce 25,000 barrels a day with a target of 125,000 barrels.

Part of the oil produced in Ahdab will be used to generate electricity from a power station to be built in Wasit province, the official said.

Iraq sits on more than 115 billion barrels of oil, but decades of wars, U.N. sanctions, violence and sabotage have battered its oil industry.

As security improves, Iraq is trying to bring in foreign companies to help increase crude output from the current 2.5 million barrels a day to 3 million barrels a day by the end of 2008, and 4.5 million barrels a day by the end of 2013.