British oil major BP PLC and China National Petroleum Corp., or CNPC, signed an initial agreement with Iraq to develop Rumaila, Iraq's largest producing oil field, paving the way for a final deal calling for investment estimated at as much as $15 billion, an Iraq ministry spokesman said.
The BP-led group won the project to develop the southern Rumaila field in Iraq's first post-war bidding round, which took place at the end of June.
While most oil firms rejected the Iraqi oil ministry's payment terms, BP and CNPC cut their remuneration fee to $2 a barrel and won Rumaila. Seven other oil and natural-gas fields weren't awarded because international companies turned down the ministry's terms on payments.
According to the 20-year service contract, BP will hold a 38% stake in the venture, CNPC will take 37% and the remaining 25% will be held by Iraq, said Abdul Mahdy al-Ameedi, head of the ministry's Petroleum Contracts and Licensing Directorate.
Rumaila, with estimated proven reserves of 17 billion to 20 billion barrels, is currently producing some 1.1 million barrels a day, almost half of Iraq's total output of 2.5 million barrels a day. The BP/CNPC alliance promised to increase production to 2.85 million barrels a day, bringing Iraq's total crude-oil production to 4.25 million barrels a day.
"The ministry's state South Oil Co. signed today an initial agreement with BP and CNPC to develop Rumaila oil field," spokesman Assem Jihad said.
Mr. Jihad said both sides have signed an initial agreement, but that the Iraqi Council of Ministers first needs to approve it before the deal is final.
"The ministry will set an official date for signing the contract after the cabinet's approval," Mr. Jihad said.