Last year, the Iraqi Oil Ministry thwarted 3 deals that would have given Chinese companies greater control over the oil fields, and caused a mass exodus of major international oil companies that Baghdad wants to invest in its faltering economy, according to a report published by Reuters news agency.
Since the beginning of 2021, plans by the Russian Lukoil and the American ExxonMobil to sell stakes in major oil fields in Iraq to companies backed by China have faced difficulties after the interventions of the Iraqi Oil Ministry, according to Iraqi oil officials and sector executives.
People familiar with the matter said that selling a stake to a Chinese state-owned company was also among several options being studied by British "BB", but Iraqi officials persuaded it to stay in the country for the time being.
China is the largest investor in Iraq, and Baghdad was the biggest beneficiary last year of the Chinese Belt and Road Initiative, receiving $10.5 billion in financing for infrastructure projects, including a power plant and an airport.
But Baghdad has put a stop to more Chinese investment in its major oil fields.
Seven Iraqi oil officials and executives of oil companies operating in Iraq said - in interviews with Reuters - that the government and officials in state-run companies are concerned that Chinese companies' control of more oil fields will accelerate the exit of Western companies.
Three people familiar with the matter said that Oil Minister Ihsan Abdul-Jabbar, with the support of NOC officials, managed to persuade Russia's Lukoil last year not to sell a stake in West Qurna-2, one of the company's largest, to the Chinese state-owned Sinopec.
Oil wells in Nahr Bin Omar near Basra (Reuters)
Informed sources said that Iraqi officials also intervened last year to prevent companies backed by the Chinese state from buying ExxonMobil's share in the West Qurna 1 field and to persuade BP to stay in Iraq instead of selling its concessions in the giant Rumaila oil field to a Chinese company.
The Rumaila and West Qurna fields together produce about half of the oil extracted from Iraq, whose territory includes one fifth of the largest oil reserves in the world.
The Iraqi Oil Ministry did not respond to a request to comment on the deals or the minister's role in any intervention.
Two government officials said the government was concerned that Chinese hegemony would make Iraq less attractive to investors from other regions.
An Iraqi official said the Oil Ministry was concerned about giving up more control over the country's main resources.
Another official said, "We do not want the Iraqi energy sector to be described as an energy sector led by China, and the government and the Ministry of Oil agree on that."
Abdul-Jabbar convinced a foreign company last year not to sell its stake in one of the country's largest oil fields to a Chinese company (Al-Jazeera Net)
Dangerous strategy
The interventions related to the conditions of BP, ExxonMobil and Lukoil in Iraq came after the British Shell Company decided in 2018 to withdraw from the huge Iraqi Majnoon oil field.
The interventions also represent a shift in the situation after Chinese companies won the most energy deals and contracts awarded in the last four years.
Iraqi oil officials said the Chinese companies had accepted lower profit margins than most of their competitors.
The China National Offshore Oil Corporation (CNOOC) said in an emailed statement, "All the rules related to bids were formulated jointly by the Iraqi and Chinese sides in accordance with the rules of transparency and integrity."
However, rejecting more Chinese investment is a risky strategy, as there is no guarantee that other investors will emerge at a time when the government needs billions of dollars to rebuild the economy after the defeat of the Islamic State in the country in 2017.
During the past ten years, oil revenues represented 99% of Iraq's total exports, 85% of the country's general budget, and about 42% of GDP, according to World Bank data.
After major oil companies raced to enter Iraq's huge oil fields after the US-led invasion in 2003, executives say they are increasingly focused on switching to alternative energy and more profitable deals elsewhere, and they want better terms for developing oilfields. oil.
China is one of the largest buyers of Iraqi crude, and Chinese state companies have managed to establish a dominant position in the Iraqi oil sector.
Iraqi officials persuaded the British "BP" company not to sell its stake to a Chinese (European) company
Contracts and terms
The Iraqi oil sector is based mostly on technical service contracts between the state-backed Basra Oil Company and foreign companies that charge the costs they paid a fee for each barrel extracted from the field it develops, while Iraq retains ownership of the resources.
The major oil companies usually prefer deals that allow profit sharing rather than a set fee per barrel.
A Chinese executive - familiar with the investments of the China National Petroleum Corporation - said that the priority of Chinese companies is to ensure stable supplies of oil to feed the country's growing economy, not a return on investment.
There were indications that Iraq was trying to make its terms more attractive to investors.
France's Total Energies signed a deal worth $27 billion with Iraq in September (Reuters)
Reuters reported last February that France's Total Energies signed a $27 billion deal in September that included paying 40% of the proceeds from a single field.
But the deal stumbled as a result of differences over the terms and still needs the approval of some Iraqi government agencies.
Total Energy said it was fully committed to the project.
"Many major oil companies are concerned about carbon emissions and their ability to generate cash flow if commodity prices fall and are looking to improve revenues," said Ian Thom, director of research at consultancy Wood Mackenzie.
"As the priorities of energy companies change, so does the relative attractiveness of Iraq," he added.