Is China driving the Iraqi oil market?

BAGHDAD, July 17 (UPI) -- Western firms may take adverse terms to tap lucrative Iraqi oil reserves in an effort to compete with Chinese expansion in the region.

Iraq sits on some of the largest oil reserves in the world. Those reserves are readily extractable for only a few dollars per barrel.

Several Western oil companies are contesting the terms of oil contracts offered by the Iraqi government that were auctioned off during a televised event in June. But their continued push into Iraq even under adverse conditions is a sign of the growing competition from China, the BBC reports.

Out of the six oil and two gas fields on the auction block, only BP and China National Petroleum Corp. secured deals when Exxon Mobil turned down a provision for the Rumaila oil field in southern Iraq.

China has pumped billions of dollars into its foreign investment strategy in an effort to secure access to oil as its economy expands even during the global recession.

In a move to gain a foothold in the global energy market, Chinese refiner Sinopec snatched Calgary's Addax Petroleum for $8.3 billion, securing a position in the Middle East, including Iraq.

David Horgan, whose Irish oil company Petrel Resources has been in Iraq for years, says Western firms may reconsider their position.

"That fear of competition has led to the conclusion that the risks of staying out of Iraq are greater than the risks of going into Iraq," he said.