LUANDA/BEIJING: Iraq will more than double crude oil supplies to China next year to over 300,000 barrels per day, Iraq’s oil minister said, as Chinese refineries boost output to new highs to feed strong recovery in demand.
Iraqi oil minister Hussain Al-Shahristani told Reuters the supply target on Tuesday on the sidelines of an OPEC meeting in Luanda.
China is the world’s No.2 oil consumer and has recorded the fastest fuel demand growth among all countries this year.
Chinese imports from Iraq have already increased nearly three fold in the first 11 months of this year, which saw average daily imports at about 144,000 bpd, according to Chinese customs data.
Chinese traders have said they expected the imports to leap next year.
The volume of 300,000 bpd, which has yet to be finalized, would be roughly 30 percent of the contract amount China has agreed to take from Saudi Arabia, the country’s top supplier. It also comes closer to the 400,000-bpd supply expected to be renewed with Iran, China’s No. 3 supplier after Angola.
The 300,000-bpd total would be roughly 14 percent of the total of 2.1 million bpd Iraq has targeted to export for 2010.
“Price is the key. It’s cheaper than Saudi or Iranian crude,” one trader with a Chinese state oil firm said.
The sharp increase was also due to production cuts by Saudi Arabia, of the heavier grades that Chinese refiners consider more economic to process.
“I wouldn’t blame the Chinese refineries as they want to maximize the margins,” said a Beijing-based marketing executive with a Middle Eastern supplier.
China’s implied oil demand rose 18.7 percent in November over a year earlier, the fastest pace on record, due to a strong economic rebound.
Four Chinese firms are lifting Iraqi crude — state oil trader Unipec, Chinaoil, Sinochem, and Zhenhua Oil, a little-known Beijing-based oil trader affiliated to China’s defense conglomerate NORINCO.
Iraq, exempted from supply cuts by the Organization of the Petroleum Exporting Countries, is working to boost its output to around 12 million bpd in six to seven years’ time from around 2.5 million bpd now, through contracts awarded to international oil firms at two auctions this year.
China’s top energy group, CNPC, has won contracts to develop two Iraqi fields, Rumaila in consortium with BP and Halfaya in tie-ups with Total and Malaysia’s Petronas.
Meanwhile, in another development Iraq inked a preliminary deal Tuesday with a consortium led by China’s National Petroleum Corp. to develop a promising oil field, part of the war-torn country’s effort to boost its lagging oil production and increase revenue for reconstruction.
CNPC and consortium partners Malaysia’s Petronas and France’s Total won the rights to develop the 4.1 billion barrel Halfaya field in southern Iraq, one of seven deals struck during only the second round of postwar bidding that offered 15 of the country’s most lucrative oil fields for development.
The consortium plans to raise production from the current 3,100 barrels per day to 535,000 barrels per day over 13 years, Oil Ministry spokesman Assem Jihad said. Under the deal, the consortium will be paid $1.40 per barrelproduced.