China Looks to Kurdistan as Growing Oil Partner

ERBIL, Kurdistan Region - With China already sucking up more than half of the oil production coming from Iraq, the Kurds may be next in the Chinese energy cross hairs.

The Chinese begun to sink their teeth into the Kurdish Region’s vast oil potential in 2009 when Sinopec acquired Addax Petroleum, which holds a joint agreement with Genel Energy to develop the Taq Taq oil field.

To date, a total of 16 development and appraisal wells have been drilled in the Kurdistan Region of Iraq, according to a report from The Oil & Gas Year Review for Kurdistan in 2013.

“Sinopec is China’s largest oil company and has immense capacity to support the development of the downstream sector, both in Kurdistan and the rest of Iraq,” Yi Zhang, the chief executive officer of Addax Petroleum, said in the report.

Recently, a Chinese delegation visited Rasheed Tahir, the Kurdistan Regional Government’s (KRG) minister of finance and economy, to discuss the investment potential for numerous sectors, including oil.

Michael Howard, the adviser for the minister of natural resources, said currently he is unaware of any further Chinese involvement in Kurdish oil outside Sinopec.

“The region has a lot of economic potential and we have a lot of investors from a lot of different countries. Having said that, they may well be talking to individual oil companies we wouldn’t necessarily be aware of,” he said.

The Chinese Embassy in Baghdad did not respond to inquiries about increased vested interest in Kurdistan’s oil market.

But it is clear that China is looking to Kurdistan to diversify its oil resources through Addax Petroleum, a subsidiary of Chinese state-owned Sinopec.

“We hope there will be opportunities for Addax Petroleum and our shareholders, Sinopec, to consolidate with other operators in the Kurdistan Region of Iraq, to farm into blocks or to obtain equity positions through mergers and acquisitions activities,” Zhang said in the report.

“China is now making aggressive moves to expand its role, as Iraq is increasingly at odds with oil companies that have cut separate deals with Iraq’s semiautonomous Kurdish region,” The New York Times wrote recently.

The Kurds offer more generous terms than the central government, but Iraq and the United States consider such deals illegal, it noted.

It explained that the Chinese were able to undercut a majority of Western oil companies in the south of Iraq following the US.-led invasion in 2003, because the goal of their state-owned oil companies is simply to procure more fuel for China’s growing economy, not profit.