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Page added on June 18, 2014
China’s oil operations in Iraq unaffected
640061814.jpg?ve=1&tl=1 "China’s oil operations in Iraq unaffected")
PetroChina, the single biggest investor in Iraq’s oil sector, is pulling some of its staff out of the Middle East nation, but production remains unaffected as militant Islamists threaten the unity of OPEC’s second-largest producer.
China is Iraq’s largest oil client, and its state energy firms, which also include Sinopec Group and CNOOC Ltd, together hold more than a fifth of the country’s oil projects after securing some of its fields through auctions held in 2009.
Some non-essential staff have been evacuated, said Mao Zefeng, joint company secretary of PetroChina, China’s largest energy firm, without saying how many or if they had been moved out of Iraq entirely or to safer zones in the country.
A few oilfield service staff have been evacuated, a second company official said.
“We’ve got our contingency plan,” said Mao. “But as our fields are all in the south, they are not affected yet.”
Iraqi officials say the southern regions that produce some 90 percent of the country’s oil are completely safe from the Islamic State of Iraq and the Levant (ISIL), which has seized much of the north in a week as Baghdad’s forces there collapsed.
Some oil firms, such as BP and Exxon, were pulling foreign staff from Iraq, fearing the militant insurgents could strike major oilfields in the Shi’ite south.
Japan’s Japex has removed staff from southern Iraq as a precaution, but production is normal.
Malaysia’s Petronas, which has interests in four oil fields in Iraq – the Garraf, Majnoon, Badra and Halfaya – all in the south and east, said in a statement it had evacuated 28 of its 166 Iraq employees to Dubai.
Ninety-five employees essential to its operations in Iraq would stay on, while the rest would be evacuated, the state-run company added.
PetroChina partners with BP at Rumaila, Iraq’s largest producer, and operates the Halfaya and al-Ahdab fields. It was the first foreign firm to sign an oil service deal in Iraq after U.S.-led forces toppled Saddam Hussein.
Last August, the Chinese firm also agreed to acquire from Exxon Mobil a stake in the giant West Qurna-1 field, also in the south near the oil hub Basra.
PetroChina and its parent China National Petroleum Company (CNPC) both have engineers and workers in Iraq, with CNPC’s staff providing drilling and oilfield services. They outnumber the mostly administrative staff of PetroChina.
A Chinese citizen working for an unnamed Chinese company was kidnapped on June 12 but later released, Foreign Ministry spokeswoman Hua Chunying said on Wednesday, but gave no details.
Hua said there were more than 10,000 people now working for Chinese companies in Iraq, based in areas outside the conflict zone that were “basically stable”.
“We will take necessary steps, depending on how the situation develops, to ensure the safety and legal rights of Chinese companies, organisations and workers in Iraq,” she said, when asked whether there would have to be an evacuation.
“We hope the situation does not develop so that China has to have a large-scale evacuation like Libya,” she added, referring to the mass evacuation of Chinese and other foreigners during Libya’s civil war.
Sinopec, China’s second-largest oil major, which has operations in the Taq Taq field in the autonomous Kurdish region in the north, does not have any Chinese staff working there, a company press officer said.
CNOOC Ltd, which operates the Maysan oilfield in the south, has also triggered a contingency plan, while field production is normal, a company official said.
15 Comments on "China’s oil operations in Iraq unaffected"
bobinget on Wed, 18th Jun 2014 1:04 pm
German refinery techies were flown out of Iraq Friday.
British oil giants start to pull staff out of Iraq
Baiji oil refinery in Iraq
British oil majors are beginning to pull workers out of Iraq as the battle between Sunni-Muslim Islamists and government forces north of Baghdad intensifies.
BP has said it is withdrawing non-essential staff and is monitoring the situation on the frontline closely although its oil field interests are concentrated in the south of the country near Basra. BP has a contract to operate the Rumaila field that is eventually expected to pump almost 3m barrels per day (bpd) of crude.
Brent crude for one-month delivery rose above $114 a barrel on Wednesday. Graph: Bloomberg
Royal Dutch Shell is also closely following events as the Iraqi army prepares to launch a counter-offensive against Isis insurgents around the Baiji refinery, the country’s largest and a strategic asset in terms of the supply of petrol and liquid petroleum gas used for cooking.
“The safety and security of our staff is our top priority. We don’t comment on specific security issues but we are following the situation in Iraq closely,” said Shell in a statement. The Anglo-Dutch company operates the giant Majnoon field, one of the world’s largest onshore oil areas, located about 340 miles south of Baghdad.
Oil prices have spiked around $114 per barrel amid growing concern that Isis forces pose a real threat to Iraq oil production, which weighs in at around 3.5m bpd – roughly four-times more than the UK pumps from the North Sea. BP and Shell shares gained 1.6pc and 1.5pc respectively as investors bet on disruptions in oil supply from Iraq, the second biggest producer in the Organisation of Petroleum Exporting Countries.
A large plume of smoke rises from what is said to be Baiji oil refinery (REUTERS)
“The market is very closely watching the escalating violence in Iraq, a major oil producer. In the short term, higher oil prices may benefit some oil companies, but in the longer term, if it continues, it will result in an oil shock,” said Henk Potts, equity strategist at Barclays.
Baiji is the first operating refinery to fall into the hands of the Islamic fighters who had surrounded the facility for the past week.
Following the collapse of the regime of Saddam Hussein, international oil companies have rushed into Iraq to help boost the country’s output, which is targeted to eventually hit 9m bpd.
bobinget on Wed, 18th Jun 2014 1:20 pm
Even “Toyota Technicals” Need fuel Apparently.
More important but hardly mentioned….
As in Libya, it will take months, after fighting subsides, for either side to get a bullet ridden, battle damaged refinery back to full production.
This brilliant tactical move disabling Baiji refinery. With no air conditioning or diesel for home generators
the current government’s days are clearly numbered.
Juan Pueblo on Wed, 18th Jun 2014 6:31 pm
If the ISIS militants seriously damage the refinery, many in Iraq will suffer badly, particularly people living in Baghdad. The city will have a hard time under siege in summer, surrounded by enemies, with no fuel for generators and no electricity! Baghdad today with no refrigerators, fans, or A/C units will become extremely hard to live in. There will be chaos if this is not dealt with promptly. The Baiji refinery represents 25% of Iraq’s capacity and their products are mostly for domestic consumption. Baghdad and the surrounding areas will be hit the hardest. Iraq is a failed state and will break in pieces.
Makati1 on Wed, 18th Jun 2014 8:25 pm
A benefit for the Chinese is that they do not look like Westerners so are not likely to be bothered very much. The Chinese will just make deals with the new government(s) when everything settles down, no matter who wins. That is the difference between the Chinese and the West. China does not meddle in the governments of the countries it trades with. Westerners do.
Davy, Hermann, MO on Wed, 18th Jun 2014 8:59 pm
The Chinese will increasingly be in harm’s way as their risky investments in risky areas and with risky clients backfires as the world descends into disequilibrium. China has taken all those deals the westerners who have business practices and models have learned to avoid. China does not care they have plenty of fake money to invest from their massive credit expansion, industry overcapacity and excess population that needs jobs. Just another example of ghost cities but these will be ghost investments. All this was fine for China on the ride up but on the ride down much of that risky investments will be lost and re-appropriated by the host countries as these deals turn sour and new politicians come to power wanting their own rewards. The people in the third world will take their land back China is farming now eventually when food insecurity hits. What is China to do send its one aircraft carrier to police all those bad deals spread across the entire world. No, Mak, China has a rude awakening ahead. They think they can create this grand resource grab and not alienate anyone. They will lose allot of money very soon when things turn sour.
rockman on Thu, 19th Jun 2014 11:23 am
Davy – China certainly could take some hits. But I doubt they ever ignore that possibility. I’ve never worked directly with Chinese companies but I think they have a different approach to risk analysis then a US pubco. First, they have tremendously Deep pockets compared to any US company including ExxonMobil. More important they don’t have major shareholders or hedge fund managers sitting in judgment like a pubco. The Chinese gov’t is much better placed to play the long game than any pubco that frets over quarter to quarter stats.
At the end of the day it doesn’t matter if some deals blow up on them IMHO. It’s how they net out in the LONG TERM that counts. And remember it’s not so much a question of the absolute wins/loses IMHO. It’s how they do compared to competing economies…like the USA. China has a lot invested in Iraq. Counting blood I’m pretty sure the US has invested a great deal more. At the moment how does our ROR compare to China’s?
Davey on Thu, 19th Jun 2014 11:36 am
Rock, while I agree with you, the Chinese pockets will be less deep in the future knowing what we now know about China currently. The risk and deals gone bad will multiply if what we talk about on this board comes about especially since the Chinese tend to be bottom feeders often taking deals the west passes by because of risk or marginal returns.
rockman on Thu, 19th Jun 2014 12:33 pm
Davey – But less Deep then who’s pocket: XOM, BP, Chevron, Chesapeake (thru them in for a laugh).
I’m sure you know the old joke: when you and your buddy are being chased by a hungry bear it’s not as important how fast it runs but how low your buddy can run. IOW a weakened China can still bet the crap out of most of the other global economies. How much money China has to import energy isn’t as important as how much they can outbid the other global consumers.
rockman on Thu, 19th Jun 2014 12:38 pm
An I’ll make the point again: how much does China have invested in Iraq compared to what the US has pumped in over the last 20 YEARS? And how much Iraq oil is currently being shipped to China compared to how much the US receives?
Davy, Hermann, MO on Thu, 19th Jun 2014 1:57 pm
Again, agreed Rock, but, the big fall the hardest The potential for a Chinese hard landing is significant possibly leaving many investments stranded by a lack of capital to maintain them. No doubt China has the ass to play hard ball but countries just like people can overextend themselves leaving them exhausted and needing to regroup. History has proven this out multiple times
Makati1 on Thu, 19th Jun 2014 10:43 pm
rockman, give it up, Davey is anti-China/anti-Asia and does not want to hear anything positive. I suspect it has something to do with his past. But that is hos prerogative. He seems to believe everything he reads in the US MSM as true about Russia and China even though they are just the current ‘axis of evil’ as defined by the Empire. That they are too big to bully, like the 3rd world countries previous, is frustrating for them. They know the West’s time is short and if they are to conquer the world,it has to be soon.
Davy, Hermann, MO on Fri, 20th Jun 2014 6:16 am
Mak, unlike your hypocritical use of MSM to support your one sided message of down with the west and up with the east I am balanced. If it appears unbalanced it is because I am not going to allow you to normalize the conversation in the direction of a glorious east and a vanquished west. This forces me to highlight the shortcoming of Asia and especially China. Facts are facts Mak. I don’t think you will deny the population of Asia with its corresponding overshoot in all categories. Are you going to post that Asia is self-sufficient in food? Are you going to post that China has little debt creation. Mak, are you going to tell me there is no pollution in Asia? You will be ridiculed Mak, if you do. Mak, hypocrites and misguided ideologues must be put to the test. You distort the truth for your selfish purpose of personal justification of your move out of the US to a third world country that will collapse very quickly when food insecurity begins and the liquid fuel crisis start. I am sure our fellow poster here on PO weary of our constant battles. It is you that insist on the inflammatory posts. I only respond as I must in the name of protecting the truth and the country I love. The truth is a mix bag of conditions and situations not your constant propaganda of a one-sided extreme version of a vanquished US and glorious East. If you would tone down your puke I would not even comment behind you. Yet, I think you like it. You must be starved for attention or something. Get a life Mak, or I guess your life is about over so what good would it do.
Pops on Fri, 20th Jun 2014 7:26 am
So why isn’t China sending in “advisors?”
Davey on Fri, 20th Jun 2014 8:23 am
Pops the same reason they don’t contribute to disasters. China is cheap, selfish, and in it for themselves. This is no different elsewhere but China is the poster girl for lack of compassion for the rest of the world. To be fair the US needs to stay home more. The US gov normally has alterior motive in aid but this is not true of the significant donations from the American public. Iraq is a different animal the stakes are too high to turn away from.
louis wu on Fri, 20th Jun 2014 12:06 pm
Probably just about everyone China has there are “advisors”. Just waiting for the right trigger event.