Iraq’s oil ministry on Monday signed an initial agreement with China’s state-run Zhenhua Oil to develop the southern portion of the East Baghdad oilfield.
Iraq is seeking to increase production from the East Baghdad oilfield to 40,000 barrels per day within five years.
The oil ministry expects the costs needed to develop the oilfield to reach $3 billion, said Abdul Mahdi al-Ameedi, who heads the oil ministry’s licensing and contracts office.
Iraq has made significant changes to the new service contract with the Chinese company that links global oil prices and the cost of development, he said.
“The East Baghdad contract was drafted in a way to significantly minimize the cost of oilfield development. This contract will be a model for other oil deals,” he said.
Iraq plans to utilize 20 million cubic feet of gas produced as a by-product of oil production from the East Baghdad oilfield to supply a nearby power station.
The signing of the East Baghdad final deal is expected to take place in March.
The head of the state-run Midland Oil Company, Jalal Ahmed, told reporters that the increase of crude output from East Baghdad oilfield, which he said was now producing 10,000 barrels per day, will be used to feed a nearby major electricity station near Baghdad.
Jalal also said his company has plans to upgrade production from the Neft Khana oilfield near the Iranian border to 8,000 barrels per day from the current 2,000.