x Abu Dhabi, UAEFriday 28 July 2017

Oil company on shaky ground

Iraq's Ahdab oilfield, run by China National Petroleum Corp, is considered a litmus test for other investors.

Zhing Bin, the field manager of China National Petroleum Corp's Ahdab oilfield, said locals were supportive of the project.
Zhing Bin, the field manager of China National Petroleum Corp's Ahdab oilfield, said locals were supportive of the project.

KUT // Without too much fuss or fanfare, work began on the Ahdab Oil field in southern Iraq last year, ahead of this spring's official opening ceremony, after Baghdad signed a deal with the China National Petroleum Corp (CNPC). The state-run Chinese firm was the first foreign company to complete a contract with the Iraqi central authorities and the project, on a relatively small oil reserve, was viewed as a test case to see if international firms could successfully operate in a country beset by an insurgency, deep political instability and still under foreign occupation.

Officially all is well with the Ahdab field: the Iraqi authorities say they are happy with the deal; the Chinese firm says it is enjoying local support and cooperation, and both say they are helping to exploit Iraq's resources for the benefit of the general population. There are, however, growing signs of unease and discontent about Ahdab, with reports of insurgent attacks, blackmail, looting and rising resentment among locals about being bypassed by the US$3 billion (Dh11bn), two decade-long enterprise.

"Some of the people in our villages have attacked the Chinese company because they are angry that they have not been given jobs or any kind of opportunity," said Abu Koraichi, a farmer working land near the village of al Sabah, not far from the oilfield, which lies 25km west of Kut, in Wasit province. "People are angry so they steal from the oilfield; they have been stealing electricity cables and generators and they will not stop anyone trying to make attacks against the oilfield. The poor are still poor, they feel they have heard false promises."

The 58-year-old farmer said there had been high hopes when the Chinese arrived that the largely impoverished local rural population, hit by increasingly despoiled agricultural land, would see quick benefits to their quality of life. Instead, they feel forgotten. "We don't have schools, paved roads or even a mosque to pray in and we were promised these basic services when the oilfield started," he said in an interview. "But we have seen nothing; those promises have been abandoned."

His concerns reflect a broader, nationwide fear that in a country gripped by corruption, the vast riches of Iraq's oil may end up disappearing without improving crippled infrastructure or the lot of millions who remain mired in poverty. Another resident of al Sabah village, Umm Mohammad, 65, said she was "disgusted" at the way locals had been left out of the project. "We were all told when the oil development started that preference would be given to our sons, that we would be included in the benefits," she said. "Well some people are getting jobs, but it is never the ordinary or poor local people; only the relatives of those in power get employment."

According to Iraqi news reports $1 million worth of damage was done to electrical substations and cables linked to the oilfield in April. An unnamed local official blamed "terrorist gunmen" and said it was intended as a warning to the Chinese firm that it must leave. Extra government troops were deployed to protect the oilfield. The following month provincial officials in Wasit denied claims that residents near Ahdab had been involved in looting and blackmail attempts against the Chinese operators.

In an interview, a security guard working to protect the field, who spoke on condition of anonymity, said there was rising local anger against the project. "There could be bigger problems in future as people get more annoyed about this," he said. "Some of the guards and oil workers are not recruited from the local area and they probably should be." He also said security officers who were supposed to be defending the development from insurgent attacks were not well motivated and were themselves disgruntled about their salaries.

"We get paid $350 a month. I'm not going to risk my life for that," he said. "We were initially going to get $500 a month, which you can at least live on, but we were told the government asked for this amount to be cut. We were never given a reason." Zhing Bin, the field manager for the Chinese firm's operations at Ahdab, said the locals and US troops based in the area were supportive of work at the oilfield.

"I think everyone understands the benefits of this project and the people of Wasit are ready to help us, and everyone has promised to help us and to protect us, so I'm ready to continue working," he said. Mr Zhing stressed that the world's oil businesses were looking closely at Ahdab to see if Iraq was a place worth investing in, and that the Iraqis had an interest in making the project work. "There are a lot of companies watching us to see if there is a chance for them to come here," he said. "People are now looking at Iraq and saying, 'maybe it's not the place for us'."

Last week Iraq carried out a live televised auction of oil rights on much larger fields, which ended with major international energy firms conspicuously declining to get involved in Iraq. Most said the strict terms offered by the Iraqi government made it not worthwhile financially. And there are continued worries about the security situation and the potential for political upheaval to render contracts and investments worthless.

The head of Wasit's provincial council, Mahmoud Abdul Ridha, admitted there had been some "unexpected" incidents at Ahdab but that nothing significant had taken place and that work had not been interrupted. "Some villagers cut some wires on seismic testing equipment accidentally with their agricultural machinery," he said. "It was not sabotage or an attack." Mr Ridha also said all efforts were being made to see that locals did benefit from the oilfield work. "We are trying to satisfy everyone and we understand very well that this project has been established to improve people's lives and give them work and new opportunities.

"Many of the 400 guards and soldiers involved in protecting the oil company are locals." Another cause of consternation around the Ahdab field, which is expected to produce 115,000 barrels of oil a day, has been destruction of some cultivated lands. Some farmers complain that, rather than help them earn a living, the oilfield is taking food from their tables. "It is true that Ahdab has destroyed some crops, but the farmers will be compensated in full," said Ahmad Abul Rida al Asadi, the head of the North Oil Co, the Chinese company's Iraqi partner for the Ahdab field's development.

"And as for the Iraqi government sending in additional security forces, it is a security precaution no more. All eyes are on this project because it is a foreign firm working in Iraq but work is going on schedule, we have completed two oil wells and rehabilitated another." nlatif@thenational.ae psands@thenational.ae