China among oil makers in Iraq

Tag: fuel oil

China is still negotiating the renewal of contracts agreed upon under the previous Iraqi regime, Tootoo.com reports.

Previously Iraqi officials said contracts signed by Iraq and ONGC, Pertamina, PetroVietnam and China National Petroleum Corp. would be honored, though renegotiated to bring them in line with the post-Saddam energy legislation.

A number of companies claim they have signed deals that should still be honored or were near enough to signing to give them priority. The ministry has consistently denied any preference, instead insisting that oil and gas fields and exploration blocks would be put up for bid as it looks outside the country to invest in the oil sector and boost production.

Iraq has the world's third-largest proven reserves of oil, with high expectations for finding more.

Iraq says it will use a model contract called a Service Exploration and Production Contract for exploration. Tootoo.com reports the SEPC would give a five-year exploration period and two-year extension option with a 20-year limit on development and production. A 12.5-percent royalty would be owed to the government, along with a bonus tied to discovery and production, IOD reports, which compared it to the Saddam-era ONGC deal termed "exploration, development and production contracts."

ONGC was awarded more than 3,000 square miles in the southernmost part of the country, bordering Kuwait and Saudi Arabia. It would get five years plus a two-year extension option for exploration and a phased development giving ONGC total control, transitioning to state control. ONGC would be paid in oil for profit and to recoup cost, as well as options to purchase the oil.