China National Petroleum Corp (CNPC), the country's top oil producer, has said operations have begun at Iraq's Al-Ahdab oil field, with an initial annual capacity of three million tonnes.
The field located in central Iraq, which came onstream a week ago, is a new major oil project in war-ravaged Iraq, the company said in a statement released on Monday.
The project marks "the realisation of the Chinese oil industry's goal to develop the high-end oil market in the Middle East," CNPC said.
In 2008, CNPC signed a three-billion-dollar contract to develop the Al-Ahdab oil field with another Chinese company, Zhenhua Oil, in the province of Wasit for 23 years.
The project, the first major oil development deal that a foreign firm has secured in Iraq since the fall of Saddam Hussein in 2003, revives a contract signed in 1997 that granted China exploration rights in Al-Ahdab.
Al-Ahdab's oil production is expected to reach 25,000 barrels per day in the first three years and expand to up to 115,000 barrels per day in six years, according to CNPC data.
The Al-Ahdab oil contract is strictly a service deal, which allows CNPC to charge a service fee of six dollars a barrel that will decrease eventually to three dollars, offering the Chinese an entry into Iraq ahead of Western majors.
China's state oil firms are scouring the world for resources to power what is now the world's second-largest economy.
In 2009, CNPC sealed a deal, along with Britain's BP, to ramp up production at Iraq's biggest oil field, Rumaila.
A consortium led by PetroChina, the listed arm of CNPC, has also signed a 20-year deal with Iraq to develop the Halfaya oil field.