Britain, China sign oil deal with Iraq

Iraq has signed a deal with a British-Chinese consortium to develop its biggest oil field. It's the first major oil deal approved by the Iraqi government since the 2003 US invasion. It also marks a milestone for the country, to use foreign investments to revamp its battered oil sector.

Iraq's Oil Minister Hussein al-Shahristani (R) laughs with Tony  Hayward (C), BP's chief executive, and Jiang Jiemin (L), Chairman  and the General Manager of CNPC, after a contract-signing ceremony  in Baghdad November 3, 2009. British oil major BP Plc and China's  CNPC on Tuesday signed Iraq's first major new oil deal since the  2003 U.S. invasion, snapping up a development contract for the  Rumaila oilfield, one of the world's biggest. (REUTERS/Thaier Al-Sudani)

The 20-year contract was signed Tuesday by Iraq's oil minister Hussain al-Shahristani and executives from British Petroleum and the China National Petroleum Corporation.

The deal gives the two companies development rights to the Rumaila oil field in southern Iraq, with a prospected reserve of 17.7 billion barrels.

BP and CNPC expect to increase output to 2.85 million barrels per day from the field, roughly triple the current output.

For their efforts, they will be paid two US dollars per barrel of crude they produce during the 20-year contract period.

An oil worker adjusts some controls at an oil refinery in the  southern Rumaila area in 2007. Iraq formally signed a deal with  Britain's BP and China's CNPC on Tuesday to almost triple  production at the giant Rumaila oilfield. (AFP/File/Essam al-Sudani)

BP and CNPC will pump 300 million US dollars into the venture over the first three years and ramp up production by 10 percent initially.

Iraq's oil minister says such deals are important for rebuilding Iraq.

Iraq's oil minister Hussain al-Shahristani said, "The oil ministry has taken significant steps to bring in investors to this important contract. This income will be used to finance reconstruction and rebuilding in Iraq and improve the standard of living for Iraqis."

Iraq holds the world's third largest oil crude reserves but has failed to boost production significantly following decades of war, sanctions and a lack of investment.

Since the 2003 US invasion, Iraq has been struggling to boost output, which currently stands at about 2.4 million barrels per day.