Exxon follows China lead in clinching Iraq oil deal

"These companies don't have the same constraints as their Western rivals, which have to make profits that satisfy their shareholders," said Husari. "Chinese public companies operate within the framework of state interests."

They also accept a lower level of return "if that guarantees Chinese dealers and 'made in China' products a share of the Iraqi market," she explained.

Six oil and two gas fields were up for grabs in late June but only the contract for Rumaila was sealed. In return for their investment, BP and CNPC agreed to payment of two dollars per additional barrel produced at Rumaila.

Initially, foreign firms snubbed Iraq in what had been the first such opportunity for outside investment in the sector in almost 40 years, amid concerns over the perceived low level of return on huge investments.

The service contracts offered by Baghdad are based on companies accepting a fixed fee per barrel of oil extracted rather than an equity stake.

Iraq has the world's third-largest proven oil reserves of 115 billion barrels, behind only Saudi Arabia and Iran. Oil sales, especially exports of 2.4 million barrels a day, provide 85 percent of government revenues.

However, there has been little exploration or development of fields in the past three decades because of wars and an international embargo imposed on Iraq in 1990 following Saddam's invasion of Kuwait.

Investment in Iraq's aging energy infrastructure has been hampered by delays to a key hydrocarbons law despite the urgent need for funding of the country's post-war reconstruction.

Iraq aims to boost output to seven million bpd within six years by developing the Zubair, Rumaila, West Qurna 1, Kirkuk and Maysan fields. Longer term, Shahristani's sights are set on between 10 and 12 million bpd.

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