Iraq inaugurated an oil project with the Chinese National Petroleum Company (CNPC), activating the country's first major oil deal with a foreign firm since the fall of Saddam Hussein in 2003.
Oil Minister Hussain al-Shahristani joined Chinese officials at the al-Ahdab field in south-eastern Wasit province, which should eventually produce 110,000-130,000 barrels of oil a day.
CNPC will operate Ahdab under a contract, initially signed under Saddam, which the Iraqi government renegotiated last year to gain better terms by changing it from the production-sharing agreement reached in 1997 to a set-fee service deal.
The project, while modest in terms of total output, is a milestone for Iraq as it seeks to reinvigorate its oil sector, which offers vast potential but is hindered by the effects of years of sanctions, underinvestment and war.
The government of Prime Minister Nuri al-Maliki is courting top foreign firms in two bidding rounds for long-term service contracts for major oil and gas development fields.
It hopes that, as violence recedes in most parts of Iraq, foreign investors will set aside security concerns and will be drawn by the world's third largest proven oil reserves.
Some industry officials have complained about the terms offered by the government, which wants service contracts rather than the production-sharing deals oil companies prefer.
Iraqi oil production now stands at 2.4 million barrels per day, below levels before the US-led invasion, but Shahristani hopes to increase it to a long-term goal of 6 million bpd.
Exports, which have been slowed by technical problems, are now lower than the post-invasion peak of 2 million bpd last May. CNPC, which is the parent company of PetroChina, began construction at Ahdab in January. No drilling has started.
Iraqi officials have said that part of the CNPC deal was an agreement to pipe energy to a nearby power station.
In addition to the Ahdab deal, the government has also negotiated a natural gas deal with Royal Dutch Shell). (Reuters)