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CNPC begins operations at Al-Ahdab oil field

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, June 30 -- China National Petroleum Corp (CNPC) began operations of the first phase of Iraq’s Al-Ahdab oil field, according to Chinese official media.

Al-Ahdab is expected to produce 25,000 b/d of oil in the first 3 years and 115,000 b/d in 6 years as stipulated in the $3 billion contract signed with Iraq's Ministry of Oil in 2008.

The project is the first major oil development agreement with an international firm since the fall of Saddam Hussein in 2003. It revived a 1997 contract that granted China exploration rights in Al-Ahdab.

The current Al-Ahdab contract is a service agreement, which allows CNPC to charge a service fee of $6/bbl that will decline to $3/bbl. But the agreement nonetheless provided the Chinese an entry into Iraq ahead of Western majors as part of their effort to develop the high-end oil market in the Middle East.

In 2009, CNPC signed an agreement along with BP PLC to increase production at Iraq's biggest oil field, Rumaila, while a consortium led by PetroChina signed a 20-year agreement to develop Iraq’s Halfaya oil field.

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