Analysis – China’s independent oil company elbows into Iraq’s main dominant market
Authors Chen Aizhu and Ahmed Rasheed
Singapore/Baghdad (Reuters) – China’s independent oil companies are ramping up operations in Iraq, even as some global specialty Grand Slams have scaled billions of dollars in OPEC’s second producer from a market dominated by major state-owned companies in Beijing.
The figure has not been reported, and smaller Chinese producers are expected to double their production in Iraq to 500,000 barrels per day in more profitable contract arrangements by around 2030, according to executives’ estimates at four companies.
According to several Iraqi energy officials, most privately operated Chinese players are growing for Baghdad, which is also trying to attract global giants, as more and more pressures accelerate the pressure on projects. Iraq’s oil ministry has delayed China’s control of oil fields in recent years.
For smaller Chinese companies managed by veterans of Chinese national heavyweights, Iraq is an opportunity to take advantage of lower costs and faster project development, which may be too small for the Western or Chinese Grand Slam.
The prospects in China’s state-led oil and gas industry are meagre, and overseas push reflects the model of other heavy industry Chinese companies in search of new markets for the search for production capacity and expertise.
Less known players, including Geography Orchard Oil Company, United Energy Group, CNY Oil & Gas Group and Anton Oilfield Services Group, caused a sensation last year when they won half of the Iraqi Exploration License Competition.
Executives of smaller Chinese producers said Iraq’s investment climate improved as the country became more politically stable and Baghdad was eager to attract Chinese and Western companies.
By 2029, Iraq hopes to increase production by more than 6 million BPD. China’s CNPC alone accounts for more than half of Iraq’s large sectors currently in Haifaya, Rumaila and West Qurna 1.
Profit sharing, risk tolerance
A year ago, Iraq turned into a profit-sharing contract based on a fixed-fee agreement – an attempt to accelerate ExxonMobil and Shell post-acceleration projects – helped attract Chinese independents.
These smaller companies are more agile than the larger Chinese companies and are more likely to happen than many companies that may consider investing in the Gulf economy.
The state-owned Basra Oil Co said Chinese companies provide competitive financing, cut costs for Chinese labor and equipment and are willing to accept lower profits to win long-term contracts.
