Oil & Gas

Chinese companies snap up Iraqi oil and gas blocks

May 15, 2024, 4:09 AM

An energy company representative submits his company's bid during the latest licensing rounds at the Iraqi Oil Ministry's headquarters in Baghdad

Iraq wants to add 1.6m bpd by 2027
Chinese companies win 10 concessions
Two gas fields fail to attract bids

Iraq has awarded Chinese companies a large share of oil and gas exploration concessions as it attempts to boost its hydrocarbon reserves and attract investment.

Opec’s second largest oil producer hopes to add 1 million barrels per day (bpd) of oil and nearly 3.5 billion cubic feet of gas per day.

Out of 22 prequalified companies, Chinese groups have won 10 blocks in a new licensing round, which offered 29 fields.

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The country is targeting 7 million bpd of capacity by 2027, up from around 5.4 million bpd in mid-2023.

China’s National Offshore Oil Corporation, Zhongman Petroleum and Natural Gas Group (ZPEC), Zhenhua Oil, UEG and Geo-Jade were among the selected companies, according to reports.

Other winners included Iraq’s KAR and two UAE groups. Bidders also came from Europe, the Middle East and Asia.

The contracts were awarded following two licensing rounds – reportedly Iraq’s first acreage bid round awards since 2018 – for onshore projects located in 12 provinces and one offshore block, the first to be explored in Iraqi territorial waters.

By increasing its gas production Baghdad hopes to reduce its dependence on imports from Iran.

However, no bids were made on at least two fields with large gas potential, undermining Iraq’s efforts.

Iraqi oil minister Hayan Abdel Ghani said at the weekend that the country aims to increase its crude reserves to 160 billion barrels.

According to the World Bank, Iraq has 145 billion barrels of proven oil reserves.

China, the world’s largest crude importer, is the biggest buyer of Iraqi crude. It imports around 35 percent of Opec member production, an average of 1.2 million barrels per day.

In 2023, Iraq was the third biggest oil supplier to China after Russia and Saudi Arabia, and Chinese companies manage a third of Iraq’s proven reserves and two-thirds of current production, according to S&P Global.

Iraq has overproduced its Opec quota by a cumulative 602,000 bpd in the first quarter of 2024 and agreed to reduce its crude exports to 3.3 million bpd over the rest of the year. It is limited to producing 4 million bpd.

Opec members will meet on June 1 to decide whether to extend voluntary cuts further.

Ghani said on Saturday that “Iraq has reduced (output) enough and will not agree to any new cut.”

Algeria, another Opec producer, is planning a massive exploration programme to expand its hydrocarbon reserves and production.

State-owned Sonatrach announced this week the operation will cover more than 160 thousand square kilometres in 11 sites.

Abu Dhabi National Oil Company said this month it has boosted its crude production capacity to 4.85 million bpd from 4.65 million bpd.