Chinese national oil companies are taking more risks than other international entities in energy-rich Iraq, where the Daesh threat is still posing risks to energy security, experts said.
The insurgent group, Daesh, continues to hold ground in Iraq despite the U.S.-led air strikes and Iraqi forces' attacks, since it captured the country's second largest city of Mosul last June.
Daesh's latest capture of the capital of western Iraqi province of Anbar, Ramadi, is seen as a setback to operations aimed at rooting out militants who control the country's western and northern parts.
Although, Anbar does not host major oil operations, Daesh's advance in the province raised concerns over the security and fate of Iraqi forces' military efforts.
'Chinese companies are perhaps less risk averse,' said Christopher Haines, senior oil analyst at BMI research, noting that Chinese oil giant PetroChina will increase production in the Halfaya oil field by 100,000 barrels per day (b/d) in 2015.
The Halfaya oilfield is located at the southern part of the country; a relatively safe part without major insurgent activity under Shia control.
'We might see in Chinese NOCs short-term behavior in Iraq a higher risk tolerance than some of their IOC counterparts,' said Clara Gillispie, a director at the National Bureau of Asian Research, given the Chinese companies' stance over similar unrest in Libya and South Sudan.
'Chinese companies have been, and will continue to be, key investors in the country,' she added, as Iraq is expected to be a major global oil source while China's hunger for energy will continue to rise in the next three decades, despite the slowdown in its economy.
However, Gillispie said Chinese stakeholders' perspective on Iraq is shifting due to the changes in the global oversupplied oil markets, as they lean on more stable and reliable options such as 'Australia and even North America.'
China's investment is estimated to reach some $10 billion in the Iraqi energy sector based on reported 2014 figures, as the country is China's fifth biggest oil supplier.
China's output in Iraq makes up a quarter of Chinese NOCs overseas production with 472 thousand barrels per day production entitlement, according to International Energy Agency. Iraqi oil is seen by China as a replacement for falling Iran exports under Western sanctions.
'We should anticipate that Chinese companies will continue to invest in Iraq, but how this investment stacks up against their global portfolios will increasingly come into question,' she explained.
Haines, took a different perspective and underlined that Iraq's deteriorating financial situation is holding IOCs away from further investment in the country.
The Iraqi government owes some $20 billion to the oil companies operating in the country, according to Haines, who cited British Petroleum's cut in investment of $1 billion due to the uncertainty in Iraq's finances.
BP is allowed to increase its oil shipments in exchange for Iraqi government payments, according to reports last month.
- 'Baiji Refinery to be offline for years to come'
The Baiji Refinery, a key facility to Iraq's energy sector that used to generate one third of the total fuel produced in the country with 200,000 barrels per day, has seen tete-for-tete clashes between Iraqi forces and Daesh in the last weeks.
Haines said the facility could remain offline for years due to the damage during the heavy fighting around the site.
'We do not see any international company (even the Chinese) showing interest in repairing the refinery until the security situation is completely secure, which could be years,' Haines said.
'It is more likely focus will shift to the construction of one of the new proposed refineries in Karbala, Nassiriyah or Maysan, which are in more secure regions of Iraq,' he added.
By Furkan Naci Top
Anadolu Agency
furkan.top@aa.com.tr