BAGHDAD, May 19 (UPI) -- A Chinese-led consortium has clinched an oil contract with Baghdad to develop the highly prized Missan field, consolidating Beijing's grip on the energy sector in a country that sees itself eclipsing Saudi Arabia in production.
The Middle East Economic Survey, a widely respected energy industry newsletter published in Cyprus, reported Monday that Iraq's Oil Ministry expects to boost output by 600,000 barrels per day to 3.2 million bpd by the end of 2011.
It quoted Abdulkarim al-Laibi, Iraq's deputy oil minister for upstream, as saying that the increase will come from fields awarded to 10 foreign consortia in a cluster of first-round auctions in 2009. Further auctions are expected.
The ultimate objective is to push production up from the current 2.4 million bpd to 10 million-12 million by 2017, surpassing Saudi Arabia's current production level.
"In general, the companies we signed with will make the 10 percent capacity rise for the first-round awards and initial production rates for the second-round fields within the next two years," Laibi said.
Chinese companies will play a prominent role in that drive by upgrading the long-neglected fields to generate the funds to pay for Iraq's massive reconstruction program.
The China National Offshore Oil Corp., partnered with the state-run Turkish Petroleum Corp., known as TPAO, won a 20-year production contract for the Missan field outside the city of Amara in southern Iraq on Monday.
Missan, 220 miles southeast of Baghdad, contains an estimated 2.6 billion barrels of oil spread over three sub-divisions, Fakka, Buzurgan and Abu Ghraib.
The consortium plans to boost Missan's current production rate of nearly 100,000 bpd to 450,000 bpd over the next six years.
CNOOC is the third Chinese oil company to acquire a 20-year production contract in postwar Iraq.
That underlines Beijing's aggressive drive to secure oil supplies in the Middle East and Africa, along with other raw materials, for its ever-expanding economy.
The Chinese have become notorious in a business known for its rough-and-tumble methods by stopping at nothing to secure these raw materials.
But establishing a strong position in Iraq is a key priority for Beijing. Iraq has the fourth-largest oil reserves in the world, after Saudi Arabia, Iran and Canada.
The country sits atop reserves estimated at the equivalent of 115 billion barrels of oil. But there has been little exploration for the last 15 years or so, and industry analysts believe Iraq probably has as much oil again.
At a time when oil reserves are generally being depleted at an accelerating rate, that makes Iraq one of the very few places on the planet that is expected to sustain oil production for the next 50 years.
More importantly, production costs in Iraq are low -- around $3 per barrel, compared with $70 in the Gulf of Mexico.
In November 2008 two Chinese companies, the state-run China National Petroleum Corp. and China North Industries Corp., won a $3 billion joint deal to develop the al-Ahdab field in central Iraq. It has reserves of 1 billion barrels.
In June 2009 a consortium headed by CNPC and BP won a technical service contract for Iraq's biggest field, Rumaila field, in southern Iraq. It has reserves of 17.8 billion barrels.
They plan to boost its output from 1.1 million bpd to 2.8 million over the next 20 years.
In late 2009 CNPC established another consortium with Total of France and Petronas of Malaysia to develop the Halfava field, holding an estimated 1.4 billion barrels.
Sinopec expanded its Iraqi holdings in August 2009 with the $7.24 billion purchase of Swedish oil company Addax, which has operations in Iraq.
Some industry commentators believe Iraq's production objectives are too ambitious, in part because the Organization of Petroleum Exporting Countries will not accept such a challenge that could derail its pricing policies and force other members to cut back production to accommodate a resurgent Iraq.
But these critics also cite continuing political uncertainty and a glaring lack of Iraqi oil infrastructure to enable such a massive production hike.
The Oil Ministry says it plans a conference with the oil companies in July to work out the logistical problems.
This includes construction of a greatly expanded network of pipelines and export terminals that will be able to handle up to 10 million bpd, five times the current level of 2 million bpd -- providing Iraq remains relatively stable.