Iraq wants China in on oil development

BAGHDAD, June 20 (UPI) -- Iraqi leaders beginning a week-long China visit are hinting at reigniting a Saddam-era oil deal, though such a move is clouded by Iraq's stalled oil law.

President Jalal Talabani this week is leading a delegation that includes the oil minister and four other cabinet members, the first Iraqi head of state visit to China since diplomatic ties were set up in 1958, China Daily reports.

"We encourage Chinese enterprises to join the multinational competition for exploration of Iraqi oilfields," said Mohammad Sabir Ismail, Iraq's ambassador to China.

The visit will encompass a spectrum of economic meetings, but with Iraq oil sales making up 93 percent of the federal budget and in deep need of investment, the petroleum sector is likely to top the bill.

Iraq produces only 2 million barrels per day now, down from 2.6 million bpd before the war. The country is home to 115 billion barrels of proven reserves, the third largest in the world.

While Iraq's oil sector was crippled by sanctions, Saddam Hussein also mismanaged the sector, overworking it and depriving it of needed maintenance. He did sign numerous oil deals with various countries, including China.

The Wall Street Journal reports Talabani will try to renew a $1.2 billion deal to explore an oil field in Iraq's southern Wasit province, first signed in 1997 with the China National Petroleum Corp.

"I am looking forward to the visit and hope it will open a new phase of the bilateral relations between the two countries," Talabani told the Xinhua news agency.

Oil Minister Hussain al-Shahristani said during an October 2006 visit to China that negotiations over the Al Ahdab oilfield were to begin. A law governing Iraq's oil, however, has been stuck for months in political wrangling over control of the oil fields. Any new contract depends on the oil law, which may not even be introduced to Iraq's parliament until the end of July.

Without the law to dictate investment guidelines, violence in the country has also deterred oil companies. But China, working in Nigeria's militant-laden oil sector and genocidal Sudan, may be willing to take the risk to meet its growing demand for oil.