Iraq cabinet approves BP-CNPC oil deal

The Iraqi cabinet approved a key deal with Britain's BP and China's CNPC International to almost triple production at a giant southern oilfield, an oil ministry spokesman said today.

"The council of ministers approved the agreement on Friday and it will be signed soon in an official ceremony," Assem Jihad told AFP.

The venture, expected to cost between $14 billion and $20 billion, is expected to boost production at the southern Rumaila field from the current 1 million barrels per day (bpd) to around 2.8 million bpd over its 20-year duration.

Rumaila is already integral to Iraq's oil output, contributing almost half of the nation's current production of around 2.5 million bpd.

BP and CNPC were the only companies with a successful bid when Iraq offered eight contracts at a June auction. The companies agreed to receive only $2 a barrel to operate Rumaila, which has known reserves of 17.7 billion barrels.

It is the first big upstream deal between Iraq and foreign oil majors since nationalisation of the country's oil industry about four decades ago.

Under the terms of the contract, Iraq's State Oil Marketing Organisation will be allocated Baghdad's 25 per cent stake, while BP will take 38 per cent and CNPC the remaining 37 per cent.