China continues with its long-term plan to be an ‘independent’ country in the world. This objective is clear in the dual circulation strategy (dual circulation) with which they aim to isolate the domestic market from the rest of the world, reducing dependence on foreign markets, especially when it comes to critical technology. However, this plan has a weak point: oil. Beijing can produce practically everything: from clothing to an advanced chip, but oil is another matter. Although the ‘Asian giant’ is one of the largest crude oil producers in the world, it needs to import more than 11 million barrels of crude oil every day to ‘feed’ its vast economy. In an attempt to solve this deficiency that cannot be covered with Chinese oil, The country’s public companies are making a clear commitment to foreign oil fields through direct investment. The oil will not be Chinese, but at least it will be explored, drilled and extracted by Chinese companies.
Although China is making one of the world’s biggest bets on renewable energy (covering deserts with solar panels, creating mammoth wind turbines…), Beijing knows that oil will continue to be key for several years and that it will be very necessary to achieve an energy transition. safe. The Chinese company CNOOC admitted this summer that fossil fuels will be a stabilizing factor in global energy demand for the foreseeable future.
Thus, the Chinese energy giant CNOOC has signed an exploration, development and production contract (EDPC) with the Iraqi state oil company Midland Oil Company to search for oil and gas in the Block 7 field in the Middle Eastern nation. CNOOC Africa Holding, the wholly owned unit of the Chinese state-owned oil and gas company, will hold 100% of the stakes and will act as operator of Block 7 of 6,300 square kilometerslocated in the province of Diwaniyah, in central Iraq, according to the agency Reuters.
This site is like a ‘jack-in-the-box’
Although the information about the estimated crude oil reserves of that block is still confidential (if CNOOC has any estimate) and not very exact, the Chinese firm has shown its enthusiasm and joy with the granting of this license, which suggests the possible potential of this ‘chunk’ of land. Executives at the Chinese firm have admitted that the goal is for a major oil find to be made as drilling and research progresses.
These 6,300 square kilometers extend across the provinces of Diwaniyah, Babylon, Najaf, Wasit and Muthanna in central and southern Iraq. This development is part of China’s efforts to increase its energy independence from the world and Iraq’s to increase its oil production and attract foreign investment to extract its vast hydrocarbon reserves. A part of the pie will go to Iraq through taxes and its public companies.
The agreement formalizes CNOOC’s winning bid to explore the blockpart of Iraq’s recent licensing round in which Baghdad offered to share profits with partners instead of previous technical services contracts, in a historic policy change. Zhou Xinhuai, executive director of CNOOC, after having obtained the license, admitted that the hopes placed on this block are high, words that came, obviously, after having closed the license.
Block 7 in Iraq could end in a huge new discoveryalthough the company will first need sufficient evaluations to understand its reserve potential, Zhou says. “CNOOC will maintain our high standards in selecting new assets globally,” Zhou said.
Three years to drill the ground
Although the Chinese firm has already been able to carry out its scientific and geological investigations, now it is time to confirm that there are large quantities of crude oil underneath. Under contract, the first stage of the exploration period will last three years, without specifying when it will begin. CNOOC is one of the main international companies producing oil in Iraq, with activities focused on the Maysan field in the southeast of the country.
Iraq has one of the largest proven oil reserves in the world, estimated at around 145 billion barrels, according to data from OPEC and the Iraqi Oil Ministry. This figure makes Iraq the fifth country with the largest proven reserves, behind countries such as Venezuela, Saudi Arabia and Canada (if you take into account its bituminous sands). However, the country’s production potential has not been fully exploited due to several challenges, including limited infrastructure, internal conflicts and lack of investment in advanced technology. With China’s help, Iraq will be able to develop its potential and Beijing will achieve greater independence.
On the other hand, CNOOOC aims to pump 700-720 million barrels of oil equivalent by 2024or between 3 and 6% above last year’s level, CNOOC officials said on an earnings call after posting a record interim profit. CNOOC expects domestic natural gas production to maintain strong growth through 2030 and is ready to monetize the vast oil and gas resources in Guyana, CEO Zhou Xinhuai said at a conference.
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