UK oil company BP has entered into a partnership with China National Petroleum Corp (CNPC) to develop the Rumaila oilfield in Iraq.
BP holds a 38 per cent stake in the Rumaila venture, with CNPC holding a 37 per cent share. The remainder is controlled by IraqÔÇÖs State Oil Marketing Organisation.
The deal marks the first major agreement between Iraq and major foreign oil companies since the country nationalised its oil industry 40 years ago.
Rumaila, in the south of the country, has a current capacity of 1.1 million barrels per day, almost half of Iraq's total output, which is currently 2.4 million barrels per day.
The siteÔÇÖs total reserves are estimated to be over 17 million barrels.
BP and CNPC are planning to almost triple the fieldÔÇÖs output, bringing it up to 2.85 million barrels per day over the life of the contract, which runs for 20 years.
The total cost of the venture looks set to come in at between $14 billion and $20 billion.
The deal comes as Iraq aims to breathe new life into its struggling oil sector. In June, the countryÔÇÖs Oil Ministry held oilfield auctions in order to attract foreign investment that would enable a major overhaul of the industryÔÇÖs facilities and techniques.
BP and CNPC were the only two companies to win bids in the June auctions, having cut their remuneration fees to $2 a barrel. Contracts for a total of seven other oil and gas fields were not awarded as the companies would not accept the ministryÔÇÖs payment fees.
However, since June, Exxon Mobil has submitted a revised bid for Zubair oilfield, while Chevron and Total have made a new offer for West Qurna field.
The second round of auctions is due to take place in early December, Iraqi officials have confirmed.
Iraq relies on the export of oil to finance improvements to its infrastructure, including its water system and power supply.
The agreement between Iraq, BP and CNPC will be put before the Iraqi cabinet for approval before the final contract is signed, after which a ceremony will announce the official commencement of work by the two companies.
BP is EuropeÔÇÖs second largest oil company after Royal Dutch Shell, while CNPC is ChinaÔÇÖs largest oil and gas firm.
Earlier this year, CNPC began work on IraqÔÇÖs south-eastern Ahdab field.
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