China advances into Iraq’s oil industry as US retreats

• China pumps 3 million bpd in Iraq
• ExxonMobil out and PetroChina in
• Security concerns put off US majors

Iraq is gradually handing over its oil industry to Chinese companies as US businesses quit the country because of security concerns, according to local analysts.

Chinese oil companies now manage more than two-thirds of Iraq’s oil and gas resources and about 3 million barrels per day (bpd) of its crude production.

Chinese contractors have direct stakes in nearly 24 billion barrels of Iraq’s crude reserves, according to Nabil Al Marsoumi, an energy and economics professor at the Southern Iraqi Basra university.

“Chinese companies are now in control of most of Iraq’s oil industry. They have developed a complex network of influence through multiple projects in the country’s hydrocarbon sector,” Al Marsoumi wrote in a Facebook post.

By contrast, several US oil majors have pulled out of Iraq or scaled back their operations because of security concerns in recent years. In the Kurdistan region, American businesses are also grappling with legal challenges and pressure from the Iraqi government.

Now the escalating tensions caused by the Israel-Iran conflict may prompt more US companies to reconsider their operations in Iraq.

“US companies are sensitive to unstable situations and they often come under pressure from their government. It seems Chinese companies do not mind such concerns in Iraq,” said Walid Khadduri, an Iraqi oil analyst.

In early 2024 Texas oil giant ExxonMobil exited the West Qurna 1 oilfield in southern Iraq and handed over its operations to PetroChina as the lead contractor.

PetroChina now holds the largest stake in the field, which is one of the world’s biggest oil reservoirs, containing more than 20 billion barrels of proven crude deposits and pumping nearly 550,000 bpd.

Many of the oil concessions awarded by Iraq to foreign companies over the past two years went to Chinese developers.

• Iraq and Syria reopen vital border crossing
• China to hit peak oil demand in 2027, says IEA
• Iraq considers plans to invest in Asian oil refineries

In late 2024, Iraq signed contracts with six Chinese companies and announced that projects awarded to them would increase its oil and gas production by nearly 750,000 bpd and 800-850 million cubic feet per day respectively.

Last month Baghdad signed a multibillion-dollar contract with China’s Geo-Jade company for the development of Tuba oilfield in Basra to expand its output to 200,000 bpd.

“In the geopolitical battle between Washington and Beijing over Iraq’s oil and gas resources, China appears to be winning,” S&P Global wrote in late 2024.

“Despite Iraq’s wealth of resources and ambitious production targets – as well as strong encouragement from Washington to invest – US companies remain deterred by high levels of risk and corruption, dealing a blow to Washington’s efforts to counter the influence of Iran in Baghdad and China’s growing sphere of influence.”