China Keeps a Close Eye on Oil Interests in Iraq

June 17:


A refinery in Zubair, Iraq. China’s largest state-owned energy company says it has invested billions in the Iraq oil industry.

As the violence of the American-led invasion of Iraq and the ensuing civil war ebbed after 2008, some analysts said that China had emerged as the big winner from the strife, at least in terms of oil interests. China National Petroleum Corporation, the largest state-owned energy company, had become the biggest foreign investor in the Iraqi oil industry. With a tolerance for risk and willingness to accept lower profits, C.N.P.C., as it is commonly called, won major government contracts and invested billions of dollars in Iraq.

Now, the company’s acceptance of risk is being tested as it anxiously watches the growing Iraq crisis. A well-trained Sunni jihadist group, the Islamic State in Iraq and Syria, or ISIS, began a broad offensive this month that threatens to drag Iraq back into civil war.

“Together with its cooperation partners, the company will closely monitor any changes in the situation and ensure the safety of its personnel and property,” a representative of C.N.P.C. said on Sunday night in a text message responding to emailed questions.

The company’s literature boasts of its role in helping Iraq rebuild its oil infrastructure after the American invasion. Iraqi oil fields are among the world’s largest, and C.N.P.C. holds substantial stakes in several of them.

The biggest Iraqi fields are located in the south, a part of the country that is mostly Shiite Arab and in which the Shiite-dominated Iraqi government and its security forces have wide support. Religious leaders can mobilize Shiite militias there, too. So it is unlikely that Sunni Arab jihadists, who have captured territory in western and northern Iraq, would be able to seize the fields. In recent days, ISIS has fought for control of cities in the north but has stopped short of trying a large-scale invasion of Baghdad, which is mostly Shiite.

The C.N.P.C. field that is the farthest north, Al Ahdab, is located more than 110 miles southeast of Baghdad. Three other fields in which C.N.P.C. also operates — Rumaila, Halfaya and West Qurna 1 — are located farther south, near the Iraq-Iran border. One Chinese state-owned energy company, Sinopec, does have a stake in an oil field in the north, but that field is in the autonomous region of Iraqi Kurdistan, which is protected by formidable ethnic Kurdish militias that have vowed to defend their mountainous home region against ISIS.

The lightning speed with which ISIS took over northern cities, including Mosul, the country’s second largest, appears to have made even foreign oil operators in the south nervous. Iraq Oil Report, an online publication on the industry, said on Monday that two Western companies, BP and Exxon Mobil, had evacuated some or all of their foreign workers. The report attributed this to Iraqi employees at the sites. (On Sunday, the United States State Department announced that a substantial number of embassy staff in Baghdad would be evacuated.)

BP did not answer emailed requests for comment. A spokesman for Exxon Mobil said the company does not publicly discuss security issues.

Last Friday, June 13, as the Sunni militants advanced toward Baghdad, the international crude oil benchmark rose above $114 for the first time in nine months, Bloomberg News reported. But prices dropped on Tuesday.

C.N.P.C. is no stranger to investing in some of the world’s more troubled regions, including South Sudan and Angola. The company is a latecomer to global energy exploration, at least relative to Western companies, and it is among the flagship state energy companies trying to meet China’s surging demand for oil and gas.

C.N.P.C. says it has invested $4 billion in the Iraq oil industry. In 2008, PetroChina, C.N.P.C.’s listed subsidiary, signed a service agreement with the Iraqi government to develop the Al Ahdab oilfield. The next year, C.N.P.C. took a 37 percent stake in a consortium led by BP that is developing Iraq’s largest oilfield, Rumaila. Since 2009, PetroChina has also been the operator of the Halfaya field, and last November it bought a 25 percent stake in the West Qurna 1 field from Exxon Mobil.

Iraq’s oil production is now up to levels last seen before the American invasion of 2003. In 2012, Iraq became the second-largest crude oil producer in the Organization of Petroleum Exporting Countries, overtaking Iran. But the sector continues to be plagued by infrastructure and security issues.

China has been increasing the amount of oil it imports from Iraq. Last year, imports from Iraq rose by about 50 percent, making Iraq the fifth largest source of crude oil imports for China.

Chinese interests in Iraq are not limited to the oil industry. Chinese companies have invested in a range of infrastructure projects in Iraq. China Youth Daily, a newspaper tied to the Communist Youth League, estimated that there are 15,000 Chinese citizens working in Iraq.

Chinese construction and contracting companies generally bring large groups of Chinese laborers to foreign sites. That has forced Chinese officials to consider organizing mass evacuations if crises befall these locations. When Libya descended into civil war in 2011, Chinese officials arranged the evacuations of 35,000 Chinese citizens, mostly by sea, according to state news media.

On a trip to Angola in early May, Prime Minister Li Keqiang met with more than 40 local Chinese businesspeople to discuss China’s growing interests abroad and accompanying safety issues. A noticeon the Chinese Foreign Ministry website said that Mr. Li told the businesspeople that Chinese leaders attached great importance to the welfare of Chinese citizens abroad and planned to improve global consular services.

Source: http://sinosphere.blogs.nytimes.com/2014/06/17/china-keeps-a-close-eye-on-oil-interests-in-iraq/?_php=true&_type=blogs&partner=rss&emc=rss&_r=0