China signs oil agreement in Iraq

BAGHDAD — North Oil, an Iraqi-owned company, has signed a contract with a Chinese state-owned oil corporation, CNPC, that was first negotiated during Saddam Hussein's regime, an official in Iraq's oil ministry said Tuesday.

The deal is worth $3.5 billion, said the official, Ahmed al-Shamaa, the deputy oil minister.

It is the first major oil-development deal that Iraq has made with a foreign company since the U.S.-led invasion in 2003.

It will allow CNPC, with Norinco, another Chinese company, to develop the Adhab oil field in Wasit province in southern Iraq for 20 years, Shamaa said in a telephone interview.

"It has been the same contract since Saddam's regime, but we changed it from a production-sharing contract to a service contract," Shamaa said.

"The contract includes developing the field, digging wells, laying down bibs, delivering crude oil to the national grid, and natural-gas processing and delivery."

The Wasit province is about 100 miles southeast of Baghdad.

It has been the scene of sporadic attacks since the U.S.-led invasion in 2003.

The official said that as a start the field will produce 25,000 barrels a day with a target of 125,000 barrels.

Part of the oil produced in Ahdab will be used to generate electricity from a power station to be built in Wasit province, the official said.

Iraq sits on more than 115 billion barrels of oil, but decades of wars, U.N. sanctions, violence and sabotage have battered its oil industry.

As security improves, Iraq is trying to bring in foreign companies to help increase crude output from the current 2.5 million barrels a day to 3 million barrels a day by the end of 2008, and 4.5 million barrels a day by the end of 2013.