Aug. 20 (Bloomberg) -- Iraq's Oil Minister Hussain al- Shahristani will visit Beijing at the end of this week to conclude a contract to develop the Ahdab oil field with a unit of China National Petroleum Corp., an official at the ministry said.

The contract may be signed after al-Shahristani meets officials from China National's Al Waha Petroleum Co. unit, the official, who declined to be identified for security reasons, said by telephone yesterday. The government has said the Ahdab field in southern Iraq may produce about 90,000 barrels a day.

If concluded, China National will be the first foreign company to win exploration rights from the central government in Baghdad since the U.S.-led invasion in March 2003.

China's largest oil producer was awarded the field in 1997 and Iraq is renegotiating contracts that former President Saddam Hussein's regime had signed with international oil companies. Iraq has this year been negotiating technical service contracts with companies such as BP Plc, as it seeks to boost output to levels attained before the war.

Al-Shahristani will visit Poland on Aug. 21 and travel to China from there, the Iraqi oil ministry official said. Liu Weijiang, a spokesman for China National's overseas projects, declined to comment by mobile phone from Daqing in northeastern China.

Exploration Rights

The 1997 production-sharing agreement between China and Iraq has been converted into a $1.2-billion service contract, the Al-Noor newspaper cited al-Shahristani as saying Aug. 18, Reuters reported yesterday. The Chinese company, which was previously entitled to a share of profit from the Ahdab field, will now work for a fee, according to the report.

Royal Dutch Shell Plc, BP Plc and Exxon Mobil Corp. are among companies that have been negotiating with the oil ministry for the last two years to offer technical help to boost crude production. The companies hope such service contracts will increase their chances of winning exploration rights in the country, holder of the world's third-largest oil reserves.

Iraq is currently preparing its first exploration licensing round that may render the technical service negotiations redundant as companies bid for access to help develop the untapped reserves, which may exceed 200 billion barrels of crude, according U.S. Energy Department estimates. Iraq's oil production, above 3.5 million barrels a day in 2000, fell to 75,000 barrels a day after the 2003 war. It produced 2.45 million barrels a day in July, according to Bloomberg estimates.

The Kurdish regional government, in the north of Iraq, has signed numerous exploration contracts with foreign companies since 2003 independently of the central government in Baghdad. Norway's DNO International ASA, which started drilling in northern Iraq in November 2005, was the first foreign company to produce oil in Iraq since the country nationalized the industry in 1972.

To contact the reporters on this story: Ayesha Daya in Dubai adaya1@bloomberg.net; Wang Ying in Beijing at wang30@bloomberg.net.

Last Updated: August 20, 2008 03:46 EDT