The war with Iran changed many things in Iraq’s oil sector. But one trend was already moving fast before the fighting started. Chinese companies have become the dominant force in Iraqi oil. Western firms left or tried to leave. Chinese firms stayed and expanded.
On May 8, 2026, Iraq announced a new oil discovery of 8.8 billion barrels. The contract holder is China’s Zhenhua Oil. The announcement came during the war. It came during a production collapse. But it still happened. That tells you something about who is committed to Iraq for the long term.
Exxon Mobil of the United States flagged its intention to leave Iraq in January 2021. The company tried to sell its stake in West Qurna-1 to Chinese state-backed firms CNOOC and PetroChina. Baghdad blocked the sale. Exxon then filed for arbitration against Basra Oil Company. The Iraqi oil ministry offered Exxon’s stake to other Western companies including Chevron. No one was interested.
Lukoil of Russia sent a formal notification saying it wanted to sell its stake in West Qurna-2 to Chinese companies. Iraq’s oil ministry intervened and blocked the sale. To encourage Lukoil to stay, Baghdad finally approved its plan to develop Block 10, where the Russian company had discovered oil in 2017. Lukoil dropped the sale idea.
BP of Britain was considering withdrawing from Iraq and offloading its interest in the giant Rumaila oilfield to a Chinese company. Oil Minister Ihsan Abdul Jabbar led efforts to convince BP not to leave. BP instead spun off its Rumaila stake into a standalone company.
Shell of Britain and the Netherlands withdrew from Iraq’s vast Majnoon oilfield in 2018. That was earlier than the others. But it set the pattern.
China National Petroleum Corporation, or CNPC, is now the biggest foreign player in Iraq. Its subsidiary, China Petroleum Engineering and Construction Corp (CPECC), was awarded a 203.5 million-dollar engineering contract for Iraq’s supergiant Majnoon oilfield. CPECC was also awarded a 121 million-dollar contract for West Qurna-1.
Zhenhua Oil secured the 8.8 billion barrel discovery announced on May 8, 2026. That field will take years to develop. But Zhenhua is already there. CNOOC tried to buy Exxon’s West Qurna-1 stake. The deal was blocked. But the attempt showed Chinese ambition.
By late 2025, just one company — CNPC — contributed more than half of Iraq’s total crude production. Half. One company. That is not dominance. That is near-total control.
Chinese firms accept lower profit margins than Western rivals. Their priority is securing stable oil supplies to feed China’s growing economy. They are not maximizing returns for shareholders in the same way BP or Exxon must.
Iraq also changed its contract terms in 2023. The government moved from fixed fees to profit sharing. That model suits Chinese firms. Western firms expect higher returns. They did not want to accept the new terms. So they left or tried to leave.
Baghdad has drawn a line. The oil ministry blocked three prospective Chinese deals last year. Officials worry that further consolidation of fields in Chinese hands could accelerate an exodus of Western oil companies. They do not want the Iraqi energy sector to be labeled as “China-led.”
However pushing back against Chinese investment is risky. There is no guarantee other companies will step up. Western firms are gone or shrinking. Russian firms face sanctions and uncertainty. That leaves China.
Before the war, Iraqi production stood at 4.5 million barrels per day. Chinese-controlled fields made up more than half of that. After the war, production collapsed to 1.4 million barrels. But Chinese firms did not leave. They waited.
Iraq needs billions of dollars to rebuild its economy. It needs investment to restore damaged fields. It needs partners who will stay through wars and crises. China offers that. Western companies no longer do.
The shift did not start with the war. The war just made it visible. Chinese dominance in Iraqi oil is not coming. It is already here. The only question is whether Baghdad can manage it without losing all its Western partners. So far, the answer is not clear.
