Iraq on Tuesday cleared a plan to develop an oil field south of Baghdad in collaboration with China Petroleum, which will charge Baghdad a service fee of six dollars for producing a barrel of oil. Iraqi Oil Minister Hussein al-Shahristani said the cabinet had approved the three-billion-dollar deal that will see state-owned China National Petroleum Corp involved in developing the Al-Ahdab oil field in the central Shiite province of Wasit.
"The Chinese company will charge six dollars per barrel of production as service fees which would decrease gradually to three dollars," Shahristani told reporters inside Baghdad's heavily fortified Green Zone. He said the plan is to be produce 25,000 barrels of oil per day in the first three years.
An Iraqi oil ministry official last month told AFP that the oil field would become fully operational in three years' time and is likely to produce oil for 20 years after that. The present agreement revives a 1997 contract signed by the former Iraqi regime of Saddam Hussein that granted China National exploration rights to the Al-Ahdab oil field in a deal then worth 700 million dollars over 23 years.
However, activities were suspended due to UN sanctions and security issues following the US-led war in 2003 that toppled Saddam. Shahristani said Baghdad had successfully managed to change the previous joint venture contract into a mere service agreement. "Our view is that Iraqi oil should not be shared with anyone. We will pay service fees," he said.