City A.M. Reporter
OIL major BP and China’s CNPC yesterday signed Iraq’s first major new oil deal since the 2003 US invasion, snapping up a lucrative development contract for the Rumaila oilfield – one of the world’s biggest.<br /><br />The 20-year contract for the southern oilfield 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.<br /><br />The deals face huge political risk. There is no guarantee the next government following an election in January will honour them, and Iraq is still wracked by political violence and bomb attacks by Sunni Islamist insurgents, such as al Qaeda.<br /><br />As Iraq emerges from the sectarian carnage unleashed by the invasion, foreign capital and expertise is crucial to reviving the oil sector and raising the billions needed to rebuild.<br /><br />The country holds the world’s third largest crude reserves but has failed to ramp up production significantly after decades of war, sanctions and underinvestment.<br /><br />“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,” Oil Minister Hussain al-Shahristani said.<br /><br />“This fortune will now fund reconstruction and rebuilding and improve the lives of all Iraqis.”<br /><br />Rumaila, with 17bn barrels in estimated crude reserves, is the workhorse of Iraq’s oil industry, producing almost half its total output of 2.5m barrels per day. The field’s reserves alone are bigger than Algeria's.<br /><br />BP and its Chinese partner expect to increase Rumailas output to 2.85m barrels per day.<br /><br />BP’s chief executive, Tony Hayward, said the company would invest $15bn.