October 29, 2006	Sunday	Shawwal 5, 1427

BEIJING, Oct 28: China and Iraq will begin talks next month to revive the Saddam-era Ahdab oil development contract, Iraq's minister said on Saturday.

The field in central south Iraq, which is expected to produce 90,000 barrels per day (bpd), could be the first foreign oil contract Baghdad is likely to hand out after passage of its new oil and law, expected within months.

“Representatives from Iraqi oil ministry and Al Waha company, partly owned by CNPC, will start working right away,” Oil Minister Hussain al-Shahristani told reporters in Beijing while on a visit to China, where energy demand is growing rapidly.

Coming from a visit to Japan, Shahristani met with Ma Kai,head of China's macro economic planner, the National Development & Reform Commission, and top executives at the country's four state oil firms -- CNPC, Sinopec, CNOOC and Sinochem.

“Both sides realise the importance of cooperation and theneed for each other. We expect them to come right away. Only those who come right away can have chance of getting contracts in Iraq.” A CNPC official told Reuters on Saturday that the firm was keen to revive the contract but remained concerned with the country's dire security situation as the new government tries to stem insurgent attacks.

The five-month-old government has given priority to Ahdabproject because the field is close to new power stations and refineries.

The project was effectively frozen by international sanctions and then by the toppling of the Saddam Hussein regime by U.S.-led forces in 2003.

All contracts signed under Saddam would be renegotiated in line with the new hydrocarbon law, which could also effectively change the size of the Ahdab investment originally pegged at $700 million, the minister said.

Iraq wanted to target Asia, mostly China, for its additional crude exports, which it hoped would reach 2.4 million bpd by the end of the year from the present 1.65 million bpd, Shahristani said.

Iraq, which holds the globe's third-largest oil reserves after Saudi Arabia and Iran, hopes to gain a share in the rapidly expanding Chinese oil market, the world's second-largest.

“We were told Chinese companies are willing to modify refineries if Iraq can guarantee crude supply for the long term,” he said.

China was also interested in investing in refineries in Iraq, which hoped to expand its crude processing capacity significantly, he said, with elaborating.

But so far few Chinese refineries were keen on Iraq's main export grade Basra, due to its high sulphur content and unpredictable loading conditions.

Imports of Iraqi crude into China dropped 36 per cent in the first eight months this year to about 153,000 bpd.

Iraq was aiming to raise its total crude production by 20 per cent to 3 million bpd by the end of the year from the current 2.5 million bpd.

We plan to add half a million bpd every year. But that depends on how much crude we can export from the northern line, Shahristani said.

The northern export route to Turkey, a pipeline prone to sabotage, was shipping 400,000-500,000 bpd of crude, he said.

Iraq was hoping to raise its total crude production to 4 to 4.5 million bpd by 2010, if it manages to lure investment to develop its 80 discovered fields, of which 20 are pumping oil, Shahristani said. Iraq will need around $20 billion to develop its oil sector from oilfields to refineries, pipelines and marketing, he said last month.

—Reuters