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Chinese Oil Giant to Investigate Iraqi Oil Field

by Krystal

China’s CNOOC has announced a new agreement to explore an oil field in central Iraq, according to the company. The oil field, known as Block 7, will be managed by CNOOC Africa Holding, a fully owned subsidiary of CNOOC. The first phase of exploration is expected to take three years, as reported by Reuters.

This agreement follows CNOOC’s successful bid for Block 7 during a tender held by the Iraqi government earlier this year. In this round, Chinese energy companies emerged as the primary winners, securing four bids for a total of nine oil and gas deposits.

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Chinese companies’ involvement in Iraq’s oil and gas sector stems from a 2019 agreement known as “Oil for Reconstruction and Investment.” This deal allows Chinese firms to invest in Iraq’s energy infrastructure in exchange for oil supplies.

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To attract more foreign investment in its oil and gas resources, Iraq’s government has revamped its profit-sharing model for exploration and production activities. Previously, foreign investors received technical service contracts, which paid a fixed rate for each barrel extracted. However, this arrangement was not favorable for producers. They couldn’t profit from rising oil prices and had to absorb increases in production costs.

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Due to these issues, some major oil companies withdrew from Iraq. In response, the Iraqi government introduced a new profit-sharing agreement. This change aimed to address the drawbacks of the previous system and attract both existing and new investors.

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This shift in contract terms has already influenced major players in the industry. For example, TotalEnergies recently signed a substantial $27 billion deal with Iraqi authorities to develop the country’s natural gas reserves and expand solar power capacity.

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