Chinese company CNOOC has signed an agreement to explore an oil field in central Iraq, the company announced today.

The deposit, Block 7, will be managed by a wholly-owned subsidiary of China’s CNOOC Africa Holding, with the first phase of work expected to last three years, Reuters said. reported.

This agreement follows CNOOC’s winning bid for Block 7, following a call for tenders launched by the Iraqi government earlier this year in which Chinese energy majors were the winners. big winners, winning a total of four bids for nine oil and gas fields.

The entry of Chinese companies into the Iraqi oil and gas sector is the result of an agreement signed in 2019 and dubbed “Oil for Reconstruction and Investment”, under which Chinese companies are granted entry into the Iraqi energy infrastructure sector as investors in exchange for oil supplies.

In addition to this agreement, the Iraqi government has sought to further stimulate foreign investment in its oil and gas resources by changing the mechanism used to share profits from exploration and production activities.

Previously, Iraq offered foreign investors in the energy sector a technical services contract, which paid a fixed rate to the producing company for each barrel extracted. This was considered suboptimal by producers because it meant they could not make more money when oil prices increased and at the same time had to shoulder any increase in production costs.

Since this resulted in the withdrawal of some large multinationals, Iraq decided to offer those still in the country and potential new entrants a profit sharing agreement mechanism that did not present the problems mentioned above in terms of costs and benefits in terms of market prices.

It was this change in contract terms that convinced TotalEnergies to sign a massive $27 billion deal with Iraqi authorities for the development of the country’s natural gas reserves, as well as solar capabilities.

By Charles Kennedy for Oilprice.com

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