"When It Comes To Oil, China Don't Play"

Iraq's oil fields currently produce around 2.5 million barrels a day.

Iraq has signed its first major oil deal with a foreign company since the fall of Saddam Hussein's regime, a spokesman for the Iraqi Oil Ministry said Saturday.

It was the first time in more than 35 years that Iraq has allowed foreign oil companies to do business inside its borders.

The contract with the China National Petroleum Corporation could be worth up to $3 billion. It would allow the CNPC to develop an oil field in southern Iraq's Wasit province for about 20 years, said Oil Ministry spokesman Assim Jihad.

Iraq's Cabinet must still approve the contract, but Jihad said that would happen soon, and work could start within a few months.

The Chinese company will provide technical advisers, oil workers and equipment to develop the al-Ahdab oil field, providing fuel for the al-Zubaidiya power plant in Wasit, southeast of Baghdad, bordering Iran, Jihad said.

Once development begins, the field is expected to start producing a preliminary amount of 25,000 barrels of oil a day and an estimated constant daily amount of 125,000 barrels after three years, he said.

Iraq currently produces about 2.5 million barrels a day, 2 million of which are exported daily, Jihad said. That is close to its status before the U.S.-led war that toppled Saddam in 2003, but below its levels prior to the Persian Gulf War in 1991.

Iraqi Oil Minister Hussein Shahrastani told CNN in July that he is confident Iraq will be able to double its production in the next five years.

As it did with other international companies, the Saddam regime had a partnership contract with CNPC signed at the end of the 1990s that entitled the company to share profits. The current contract, however, will only be a "service contract" under which CNPC is simply paid for its services, Jihad said.

He said Iraq has provided "security guarantees" for CNPC, as it would for any other foreign company that will work in Iraq's oil fields.

Jihad called it a major and significant move for Iraq.

Iraq sparked a scramble for lucrative oil contracts in June, when Shahrastani opened bidding to 35 international companies for long-term contracts to redevelop six oil fields.

The Oil Ministry continues to negotiate short-term, no-bid contracts with several U.S. and European oil companies, including Exxon Mobil Corp., Royal Dutch Shell, Total SA, Chevron Corp., and BP.

Iraq has among the largest oil reserves in the world with an estimated 115 billion barrels -- tying Iran for the No. 2 status behind Saudi Arabia's 264 billion barrels, according to estimates from the Energy Information Administration.

China's craving for oil to drive its industrial boom and, to a lesser extent, satisfy its love affair with the motorcar, has helped to push up global crude oil prices.

To slake its seemingly insatiable thirst, Chinese oil firms are trying to squeeze more out of their wells using smarter technology and they are rumoured to be considering buying parts of Western oil majors.

China has also embarked on a frenzy of oil hunting diplomacy. China's rulers seldom go anywhere these days without talking oil, while at home in the last year they have unrolled the red carpet in Beijing to dignitaries from all 11 countries in the Opec cartel.

They got results.

China clinched deals to develop fields in Iran.

The red flag came out too, as China opted for a bit of anti-imperialist bonding. Cuba agreed to let China explore its coastal oil fields.

And eyebrows were raised in Washington when left-wing Venezuelan president Hugo Chavez offered Chinese firms operating rights to mature oil fields.

As the world's fifth biggest oil exporter, Venezuela is vitally important to the US, though relations between the White House and President Chavez are strained.

Venezuela's output has been poor since a political tussle led to the sacking of senior managers at national oil group Petroleos de Venezuela.

President Chavez may hope Chinese engineers can help "revive Venezuela's oil fields on the cheap", says Leo Drollas, Deputy Director of the UK-based Centre for Global Energy Studies.

James Lilley, ex-US ambassador to Beijing, has said "the Chinese are on an aggressive quest to increase their supply of oil all around the world", according to remarks quoted on industry website Alexander's Gas and Oil Connections.

ChevronTexaco chief Dave O'Reilly has warned of a "bidding war for Middle Eastern oil between east and west".

China is not fussy where its oil comes from, whether Kazakhstan, Sudan or Angola. Its main concern is having enough of it, and the quest is driven from the very top.

China has plenty of oil of its own, but the onshore fields in particular are old and running dry. Offshore, the situation is rosier.

Technologically, China's big four oil groups lag behind Western majors, particularly at deep sea drilling - unfortunate, given the future importance of offshore finds.

But government backing could help.

"They're less liable to put projects through the same rigorous commercial evaluation that multinationals would do," says Mr Andrews-Speed.

They are also "making great strides" with advanced seismic imaging techniques that can pinpoint oil reservoirs to save time and money, says Jeffrey Logan, China researcher at the International Energy Agency (IEA).

    Unlike America, when it comes to oil, China don't play. Very rapidly China is developing oil fields all over the world. The recent contract with Iraq will have oil on the market in just three years. American oil companies are being beaten in the global search for oil by the China National Petroleum Corporation. Right now the only advantage America has over China is the technology for off shore drilling, which is very expensive. The more research I do, the more I have become sympathetic with America's privately owned and publicly traded oil companies. As much as we all want to develop alternative energy sources, that will take another two decades to become a reality. In the mean time, America, like China needs oil. China's government owned oil company isn't badgered by populist politicians that want to strip it of the necessary profits needed to run the very expensive oil operations. American ingenuity is capable of supporting American oil companies while the transition is made to wind, solar, hydrogen or natural gas energy sources. In my opinion, the moratorium needs to be lifted on off shore drilling in America with the understanding that these new oil reserves will be for domestic use only in the transition to alternative energy sources. When it comes to oil, America can no longer afford to play around" anymore, as I see it.