BAGDHAD -- Iraq could hand China the first foreign contract to develop its vast oil resources, if Beijing agrees to put into effect a deal originally signed with Saddam Hussein, Iraq's Oil Ministry said yesterday.

While U.S. oil majors, excluded from Iraq before the U.S. invasion in 2003, wait for Iraq to pass new laws on the sector before investing, Oil Minister Hussain al-Shahristani will visit China, Japan and Australia shortly to discuss projects and developing exports, ministry spokesman Asim Jihad said.

"The minister will discuss with Chinese companies fulfilling previous contracts signed with the former regime," he said. He declined to give specific dates for the trip.

Iraqi oil officials have previously said they believe China will agree to develop the 90,000-barrel-a-day (b/d) Ahdab field in south central Iraq as the first project since the war. The field, with an estimated development cost of $700-million (U.S.), was awarded to China National Petroleum Corp. and Chinese state arms manufacturer Norinco by Mr. Hussein.

The deal, like others signed by Mr. Hussein, was effectively frozen by international sanctions and then by his overthrow. Several wells are already delineated, however, although there is no production yet from Ahdab. A second field, East Baghdad, is also slated for priority development.

The four-month-old government has given priority to Ahdab because of its proximity to new power stations and refineries. The ministry has previously said it expects output to increase from 30,000 b/d to a full capacity of 90,000 over two years. "The visit comes while the oil investment law is waiting to be approved by parliament," Mr. Jihad said of Mr. al-Shahristani's tour.

Iraqi ministers have said they hope to see legislation by the end of the year setting down the terms on which foreign companies can invest in hydrocarbon resources to help Iraq develop its war-and-sanctions-ravaged oil industry. Mr. al-Shahristani has said he hopes to discuss investment with a range of major international companies once the law is passed.

"During his tour the Oil Minister will meet major oil companies to discuss partnerships in building and developing new oil fields and projects under the new investment law," Mr. Jihad said, adding that the minister is also keen to develop export markets. "Iraq wants to increase exports to the Asian market, especially China and Japan, due to rising economic growth in those countries."

Oil, of which Iraq has the world's third-biggest proven reserves, accounts for roughly 95 per cent of the national income and the government is struggling to expand output and exports in the face of deteriorating infrastructure and sabotage.

Average exports from southern fields are 1.65 million b/d so far in September, Mr. Jihad said, and the hope is to reach 1.8 million b/d soon. But pumping from the northern fields to the Turkish port of Ceyhan is still halted because of sabotage.

"The daily loss from damage to the northern oil pipelines is from 300,000 b/d to 400,000 b/d," he said. "We are working to fix the pipeline and resume exports soon."

Russian and French companies that signed or negotiated deals under Mr. Hussein have been keen to hold on to the advantage in the face of challenges from companies from the United States and elsewhere. New Iraqi leaders, brought to power by the U.S.-British invasion, have yet to make decisions. Source; The Globe and Mail