Al Jazeera's Owen Fay reports on the oil deal and Iraqis who say they have received little benefit from it
 

UK oil company, British Petroleum and the China National Petroleum Corporation have signed Iraq's first major new oil deal since the 2003 US-led invasion.

The contract signed on Tuesday is to develop the country's southern Rumaila oilfield, one of the world's biggest.

The 20-year contract is the first of several deals Iraq expects to sign in the coming weeks and months as it tries to catapult itself to third place from 11th in the league of oil-producing nations.

Iraq holds the world's third-largest crude reserves, but has failed to ramp up production significantly after decades of war, sanctions and underinvestment.

Hussain al-Shahristani, Iraq's oil minister, said: "With these contracts Iraq has started a new phase. In the past, Iraq's oil was used to finance war, to kill Iraqis and to attack neighbouring countries.

"A fortune was wasted and Iraq's oil was a disgrace to the lives of Iraqis... This fortune will now fund reconstruction and rebuilding and improve the lives of all Iraqis."

Foreign investment

Rumaila, with 17 billion barrels in estimated crude reserves, is the workhorse of Iraq's oil industry, producing almost half of its total output of 2.5 million barrels a day.

"It is one of the biggest mistakes that he current government is making"

Isam al-Chalabi,
former Iraqi oil minister

British Petroleum (BP) and the China National Petroleum Corporation (CNPC) expect to increase Rumaila's output to 2.85 million barrels a day.

Tony Hayward, BP's chief executive, said the company would invest $15bn in the field.

"It is a very significant undertaking," he said.

The contract stipulates that BP and CNPC must spend $300m over the first 33 months and increase production by 10 per cent initially.

Mixed fortunes

But  Isam al-Chalabi, the country's former oil minister, criticised the deal, saying it had opened the country up to further exploitation by foreigners and that ordinary Iraqis would not benefit.

"It is one of the biggest mistakes that the current government is making," the former oil minister told Al Jazeera.

"If they needed technical support for the revamping of the reservoir, they should have gone to service-providing companies, not international oil companies.

"Now they are coming to Rumaila, one of the largest-ever producing fields in the world, and soon you will hear from other companies who are also going to catch other fields, like Zubair, the West Qurna, Majnoon and the rest."

Italy's Eni, the United States' Occidental Petroleum Corp and South Korea's Kogas inked an initial deal over the four-billion-barrel Zubair oilfield on Monday.

Iraq is also engaged in talks with Royal Dutch Shell about resubmitting a bid for the Kirkuk oilfield in the north.

No trickle-down

Al-Chalabi said: "Iraqis will certainly not benefit from the oil revenue, the government is going to take the money and spend it the way they want.

"These companies claim they are going to use local labour, but they definitely will not.

CNPC and BP hope to increase Rumaila's output to 2.85 million barrels per day [AFP]
 
"For example, the Chinese CNPC, with the al-Ahdab field in central Iraq, have brought every single labourer from China and now they are working together with BP to exploit the Rumaila field and I am sure they will be doing the same thing."

Rumaila was the only one out of six oilfields and two gasfields on offer that was successfully auctioned off in Iraq's first tender of development contracts at the end of June.

But subsequent closed-door negotiations, including a softening of Iraq's taxation terms, have since narrowed the differences between the oil ministry and the companies.

The Rumaila, Zubair and West Qurna deals alone are expected to add four and a half million barrels per day to Iraq's oil output capacity, roughly equal to five per cent of global oil supply.

A second auction of 10 largely undeveloped oilfields will be held between December 11-12.

Source: Al Jazeera and agencies