Mumbai: China National Petroleum Corporation (CNPC) has signed a $3 billion deal with Iraqi authorities under which the Chinese oil and gas major will develop and operate Iraq's al Ahdab oil field for 20 years.

The agreement, the first major post-war oil deal to be signed by Iraq, is a revised version of an earlier contract signed in 1997, concerning the development of the Adhab oil field.

The terms of the contract, however, have been renegotiated from an oil production sharing agreement into a set-fee service deal, Iraq's oil minister Hussain al-Shahristani said.

Iraq plans to raise production from the oilfield to 110,000 barrels a day (bpd) from 90,000 bpd in the initial contract.

Iraq, which has about one third of the world's largest reserves, is reportedly pumping 2.4 million bpd and plans to increase output by 500,000 bpd before the end of next year.

''The council of ministers has agreed to sign a contract with a Chinese company to develop the Al-Ahdab oil field in Wasit Governorate," Aal-Shahrastan said over the government-sponsored Baghdad Al-Iraqiyah Television.

The Iraqi oil ministry ''insists that companies signing oil contacts with Iraq should offer service instead of being partners in the Iraqi oil wealth, which is for the Iraqi people under the constitution.''

Therefore, the council of ministers today ''agreed to press ahead with the contract, which we initialed in China a few days ago," he said, adding that ''the $3 billion-investment project will start within two months."

The oil field, which will supply the Al-Zubaydiyah power station with fuel, ''is expected to produce 630 million barrels during the next 20 years at a total price of $63 billion," the minister said.

''About $3 billion will be used to cover the cost of the project's equipment and maintenance and another $2.5 billion will cover the operational cost within the next 20 years," he added.

In order to protect the environment, the Iraqi government has insisted that ''the water which will be used in this project should be taken from the mouth of the Tigris and Euphrates rivers."

The project also includes a gas treatment and desalination unit to serve the Al- Zubaydiyah power station, as well as an oil pipeline which will be linked to the strategic oil pipeline to export oil from the oil field to the Al-Nasiriyah, from the Basra port, and from the Mediterranean Sea ports, he said.

The project will also supply the liquid gas plant in Wasit with condensers, gas stations with fuel, and the entire region with liquid gas.