China leapfrogs US to Iraqi oil

Energy Matters0

Beijing’s success in the latest battleground represents a double blow for Washington whose troops are still fighting daily for Iraq’s security. With the return of stability, Baghdad hopes that its output can triple to six million barrels per day.

The latest Chinese outpost on the ground is a mountain camp pitched 1,400 metres above sea-level by CNPC, which has signed a contract to conduct the exploration of a 44 x 12 mile tract. The sensitivity of the Chinese presence is betrayed by the camp’s heavy fortifications. It is overlooked by watchtowers and surrounded by a square earth berm. Scientists in the 100-strong team only leave to conduct surveys in heavily-armed convoys. Fierce-looking members of the Surchi, a notorious local tribe, stand guard at the gate.

The chief CNPC geologist at the site, Chao Shu-he exudes a missionary zeal. “The Chinese have opened the door to co-operation,” said Mr Chao. “China is more and more developed and it’s our patriotic duty to contribute to development, even if we are far from home.”

Oil executives complain that China is the only big country prepared to work in Iraq. DNO, a Norwegian firm that produces 10,000 barrels a day in Kurdistan, said it solicited “dozens” of well-known firms before signing a drilling contract with another Chinese firm, Great Wall Drilling.

“The Chinese are strong in service contracts but not in exploration rights,” said Asti Hawrami, the Kurdish oil minister. “They are not taking on the risks but they are playing a strong, important role in the industry.”

“China wants security of oil supply but they also want a finger in every pie,” said Paul Stevens, an expert at Chatham House. “The Chinese now sit like death’s head at the feast, waiting for the slightest chance to get into Iraq.”

Clifford Chance, the international law firm, reported last month that up to 30 billion barrels of oil lies beneath the Kurdish territories, where fire worship around the pools of crude at the surface has a long tradition.

Such estimates have drawn a rush of wildcat firms but, because of a political dispute between the regional government and Baghdad, big American and British oil firms are notably absent.

Western majors have been warned off by threats from Hussein al-Shahristani, the Baghdad oil minister, to blackball firms seeking production in the north. However that injunction does not appear to have applied to CNPC.

As the American military presence in Iraq shrinks, the al-Ahdab deal is one of a host of signs that Beijing is well-placed to rival US ties to post-war Iraq.

An affinity with Chairman Mao Zedong, a leader who killed 10 times as many as the vilified Saddam, drew President Jalal Talabani to China last year. But when President Talabani paid $100 million for Chinese-made Kalashnikov rifles, America was so displeased it sent all Iraqi security forces on a training programme to use US M4 rifles.

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