PetroChina, the country's largest oil and gas producer, has agreed to buy a 25 per cent stake in Iraq's West Qurna 1 oilfield from ExxonMobil of the US, in a deal that cements the dominant presence of Chinese energy groups in Iraq's oil sector.
Exxon will also sell a 10 per cent stake to Indonesia's Pertamina, bringing its total interest in West Qurna 1 down from 60 per cent to 25 per cent - though it will remain operator of the field. Royal Dutch Shell's stake remains unchanged at 15 per cent with Iraqi state entities owning the rest.
Exxon's relationship with the Iraqi government soured in 2011 when it signed six contracts to explore for oil in Iraqi Kurdistan without Baghdad's approval. The central government considers such contracts illegal.
The central Iraqi government has pursued a policy of blacklisting any oil company that did deals in Kurdistan, telling them they had to choose between the north and the south. But, unusually for a big foreign oil company, Exxon has managed to hang on to its interests in both parts of Iraq.
West Qurna, which is located about 50km northwest of Basra, is one of the largest oilfields in the world. Exxon estimates that West Qurna 1 will produce as much as 600,000 barrels of oil per day by the end of 2013.
PetroChina said in a statement that entering West Qurna would allow it to "achieve synergies with its other projects in Iraq" and help it develop "a larger and stronger presence in . . . upstream operations in the Middle East".
Chinese companies already have a big footprint in Iraq. CNPC, PetroChina's state-owned parent, is developing the huge Rumaila field near West Qurna, in a partnership with BP and Iraqi entities. PetroChina also has stakes in the Iraq's Halfaya and Ahdab fields.
The contract for West Qurna 1 was one of a number signed by big foreign oil companies in Iraq after the fall of Saddam Hussein. They were designed to rehabilitate oilfields that had suffered from years of war, sanctions and neglect.
But the experience has been dispiriting for the majors. Tough fiscal terms have made it hard for them to make money on the contracts. Infrastructure constraints, especially a shortage of pipelines and storage facilities, have hampered production and Iraqi bureaucracy has proved crushing. Imported equipment is often stuck in port for months waiting for customs clearance and it can take months to secure visas for employees.
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>Chinese companies, which have been mandated by Beijing to secure a slice of global energy supplies, are generally prepared to accept tougher fiscal terms than the majors.Petrochina's move into West Qurna is not the only big oil deal Chinese groups have clinched this year. In March CNPC bought a stake in a huge natural gasfield off the coast of Mozambique from the Italian major ENI for $4.2bn.
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