OREANDA-NEWS. August 16, 2013. China's largest oil company has started the next phase of construction at its landmark oil project in Iraq as it attempts to improve energy security and make up for a decline in oil exports from Iran.

China National Petroleum Corp. said Tuesday that its listed unit PetroChina Co. (PTR) began construction of the second phase of its Halfaya oil field project. Halfaya is the CNPC's largest overseas investment project as an operator.

The second phase of the project includes a crude-oil pipeline running from southern Missan province to the port of Faw, the drilling of 60 additional wells and a processing center capable of handling 5 million metric tons a year, or 100,000 barrels a day, of crude, CNPC said in an in-house newsletter.

The second phase would double output to 200,000 barrels a day and is expected to be completed in mid-2014, CNPC said.

Last year, Iraq's oil minister, Abdul Kareem Luaiby, said a third phase would have the field pump a total of 400,000 barrels a day, with a target to hit production of 600,000 barrels a day by the end of 2016.

In late 2009, a PetroChina-led group won the right to develop the oil field some 35 kilometers south of the city of Amarah in southern Iraq. PetroChina holds 37.5% of the 20-year concession. France's Total SA (TOT) and Malaysia's Petroliam Nasional Bhd. each hold 18.75% and Iraq's state-owned Missan Oil Co. holds 25%.

Iraq, a member of the Organization of Petroleum Exporting Countries, holds the world's third-largest oil reserves and has become the second-largest oil exporter in OPEC after Iran, whose output is retreating following sanctions imposed by the European Union and the U.S. against Iran's oil exports.

The Halfaya field, which has estimated reserves of 4.09 billion barrels, was expected to produce 2.7 million tons of crude in the second half of 2012, CNPC said previously.

CNPC and its listed unit PetroChina are developing two more Iraqi fields. Along with BP PLC (BP, BP.LN), CNPC is developing Iraq's largest oil field, Rumaila, in southern Basra province, where production is already hitting 1.35 million barrels a day.