Iraqi special forces keep watch as they secure a district in West Baghdad on June 18, 2014
Iraqi special forces keep watch as they secure a district in West Baghdad on June 18, 2014 © Sabah Arar - AFP
Iraqi special forces keep watch as they secure a district in West Baghdad on June 18, 2014
Last updated: June 19, 2014

China to relocate some workers in oil supplier Iraq

China is to relocate some workers in Iraq -- where it is the biggest foreign investor in the oil industry -- in the face of spreading violence, the foreign ministry said Thursday.

Militants from the jihadist group the Islamic State of Iraq and the Levant (ISIL) have captured vast amounts of Iraqi territory in a lightning offensive that is entering its second week, prompting major international concern.

"For those Chinese workers in areas where the security situation is relatively grave we will do all that we can to help them evacuate to safer areas," said Beijing's foreign ministry spokeswoman Hua Chunying.

"Wherever is safer they will be moved to there," she added at a regular briefing.

China has more than 10,000 workers on a wide range of projects in the Middle Eastern country, officials say, although most are in the south, far from the current fighting.

Hua's comments came after state-run media reports that major Chinese oil firms have prepared evacuation plans in case the assault threatens their operations, highlighting the risks to energy supplies for the Asian giant.

"If insurgents begin to attack Baghdad, we will pull out of the country immediately," an employee of Chinese state-owned energy giant China National Offshore Oil Corp. (CNOOC) told the Global Times newspaper.

Resources are a key interest for China, the world's second-largest economy, and Iraq is its fifth-largest source of crude oil imports, while China is the largest foreign investor in Iraq's oil sector.

While Beijing has diversified its supply in recent years, it has suffered significant disruptions due to unrest in South Sudan, Libya and elsewhere.

"The Chinese national oil companies have been investing dangerously for over a decade, and they need to now increase efforts to diversity their overseas investments towards more stable countries," said Luke Patey, an expert on the international expansion of Chinese and Indian national oil firms.

Production at the four Iraqi oil fields of PetroChina, the listed arm of China's largest oil producer China National Petroleum Corp (CNPC), has not been affected, a company representative told the Global Times.

- 'Contingency plans' -

But Patey, author of "The New Kings of Crude", a book examining China and India's oil role in South Sudan, said that if operations at the oil fields were stopped, "the situation in Iraq will entrench an idea in China that it needs to move away from very risky oil investments abroad".

"They've started to do that over the last five to seven years, but the situation in Iraq -- coupled with South Sudan -- really solidifies the need for them to diversify in the future," he added.

Victor Shum, the Singapore-based vice president of industry consultancy IHS Energy Insight, said that in the medium- to long-term, the instability in Iraq will lead to higher oil pricing.

"That's not going to be good for China, because China is a major crude oil importer -- the world's largest," he said. "So, China's going to have to spend more foreign exchange to buy crude."

All PetroChina's Iraqi fields are in the centre or south of the country, but the company representative told the Global Times: "Some Chinese nationals in the north were evacuated. We have prepared some contingency plans."

The newspaper also reported that more than 1,000 Chinese employees of state-run firm China Machinery Engineering Corp were "stranded" in the northern Iraqi city of Samarra, although a company staff member disputed the description.

In recent days, some Western embassies have begun withdrawing staff from Baghdad, and on Tuesday Turkey said that it had evacuated its consulate in the southern Iraqi city of Basra.

Beijing's foreign ministry has issued security warnings and guidance to firms operating in Iraq, and Hua said: "There are more than 10,000 Chinese employees in Iraq. Most are in relatively safe areas."

A CNPC employee was kidnapped last week from an oil field project in southern Iraq, but has since been released, she said previously.

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