China Faces Unexpected Problem Drilling for Oil in Iraq — Farmers

China National Petroleum Corp. began work in March to develop the Ahdeb oil field in southeastern Iraq, marking the first significant foreign investment in the country’s vast but creaky oil industry.

Company officials expected logistical and security challenges in the war-torn country. But two months later, their investment is running into an unexpected obstacle: angry farmers.
CNPC’s hassles could offer important lessons for other big international oil companies jockeying for a role in Iraq’s oil industry. Next month, Iraq is set to award a series of drilling contracts to major international companies. Royal Dutch Shell Group PLC, BP PLC and Exxon Mobil Corp. are all vying for deals.

But Iraqis near the country’s oil fields may not be ready for them. Local Iraqi officials and residents have little experience living and working alongside big private investors from outside the country. And a petroleum law intended to spell out the legal rights and responsibilities of foreign investors in Iraq has yet to be approved by Iraq’s parliament.

Just a few weeks after CNPC started work in the field in Wasit Province, local farmers came to the site to complain that the company’s oil drilling had damaged property. They asked for compensation, and they also asked for security jobs for relatives.

Local Iraqi officials allege farmers have looted the oil site. Late last month and early this month, oil officials noticed that some exposed electrical cables, running near farmland and powering their operation, had been severed. Farmers later came forward to take responsibility but said the damage was accidental.

Three farmers who visited the local-government office overseeing the oil field in late April claimed that the project’s drilling had caused cracks in their roofs and walls, and that trucks and cables had damaged and disrupted their farm land. They are part of a group of at least 20 wheat, rice and sheep farmers who claim to have been affected, saying they fear their buildings could crumble.

Wall Street Journal (through Google News)