CHINA'S CNPC MANAGER COMMENTS ON OIL SERVICE

C O N F I D E N T I A L BEIJING 003733 SENSITIVE SIPDIS STATE FOR EAP/CN JHABJAN STATE FOR EEB/ESC/IEC/ENR JKOPP STATE FOR INR/EC STATE FOR INR/EAP STATE FOR INR/NESA STATE FOR NEA/I DEPT OF TREASURY WASHINGTON DC DEPT OF COMMERCE WASHDC DEPT OF ENERGY WASHINGTON DC CIA WASHINGTON DC NSC WASHDC E.O. 12958: DECL: 09/25/2023 TAGS: ECON EFIN ENIV ENRG IZ CN SUBJECT: CHINA'S CNPC MANAGER COMMENTS ON OIL SERVICE CONTRACT WITH IRAQ REF: BEIJING 03575 Classified By: Minister-Counselor Robert Luke for Reasons 1.4 (b) and ( d) 1) Econoff met with China National Oil and Gas Exploration and Development Corporation senior Vice-President Wang Shali on September 25 to discuss CNPC's oil service contract with Iraq (REFTEL). Wang said that the Iraqi side pressed the China National Petroleum Company (CNPC) to sign a service, vice a production sharing, agreement, claiming that a petroleum law currently under discussion and the Iraqi constitution limited Iraq's ability to sign production sharing agreements. To encourage CNPC to agree to an oil service contract, Iraqi officials also emphasized that the Al Ahdab field had already been discovered and thus there was less risk involved in developing it. CNPC,s decision to sign the service contract was influenced by their assessment that Iraq,s security situation was improving and that the Iraqi government would help protect investors. 2) Wang said CNPC's motives for signing the agreement included increasing access to crude oil. According to the terms of the agreement, China would initially only get fees from Iraq, but China could use the money to buy the oil and transport it back to China or sell it on the international market. The agreement was also an opportunity for CNPC to build a relationship with the Iraqi government and demonstrate China's long-term commitment to the country. According to Wang, Iraq would be opening five or more oilfields to competitive bidding in October and CNPC planned to participate in the bidding. 3) The China National Oil and Gas Exploration and Development Corporation is a division of CNPC. RANDT