China's oil deal with Iraq is opening doors for a future where it can sign deals on its own terms
While the outgoing government in US tries hard to make the world believe that it has done a world of wonders for Iraq and its people, China silently signed an oil deal with the Iraqi government, thus making new inroads to suffice its thirst for oil and providing doors for foreign investment in the region. The deal is an extension of the oil deal signed in 1997 during Saddam's rule and is the first international deal signed by the post-Saddam government. The $3 billion deal would provide China with oil for the next 22 years, who would then use it to generate electricity. The size of the deal can be estimated from the fact that it has been signed for the Adhab oil field in Wasit province and is expected to produce 90,000 barrels a day, renegotiated by the Chinese state-run oil company, China National Petroleum Corporation (CNPC).
The contract signed in 1997 was on a production-sharing basis but the present one is a service contract, under which China will not be a partner in profits and instead will be paid for its work. The revised deal seems to be on worse terms than the original one signed with Saddam but the CNPC is ready to take more risk than any other giant oil firm. This, says an energy security analyst, would be the ‘game changer’.
While the outgoing government in US tries hard to make the world believe that it has done a world of wonders for Iraq and its people, China silently signed an oil deal with the Iraqi government, thus making new inroads to suffice its thirst for oil and providing doors for foreign investment in the region. The deal is an extension of the oil deal signed in 1997 during Saddam's rule and is the first international deal signed by the post-Saddam government. The $3 billion deal would provide China with oil for the next 22 years, who would then use it to generate electricity. The size of the deal can be estimated from the fact that it has been signed for the Adhab oil field in Wasit province and is expected to produce 90,000 barrels a day, renegotiated by the Chinese state-run oil company, China National Petroleum Corporation (CNPC).
The contract signed in 1997 was on a production-sharing basis but the present one is a service contract, under which China will not be a partner in profits and instead will be paid for its work. The revised deal seems to be on worse terms than the original one signed with Saddam but the CNPC is ready to take more risk than any other giant oil firm. This, says an energy security analyst, would be the ‘game changer’.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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