UK energy company BP has signed an agreement with the Iraqi government to invest in several giant oilfields in Kirkuk, in a move expected to provide a big boost to the Opec producer's energy production.
The agreement is for an initial phase and includes oil and gas production of more than three billion barrels of oil equivalent, BP said in a statement on Tuesday. It includes the Baba and Avanah domes of the Kirkuk oilfield and three adjacent fields – Bai Hassan, Jambur and Khabbaz – all of which are currently operated by the North Oil Company (NOC).
The wider resource opportunity across the contract and surrounding area is believed to include up to 20 billion barrels of oil equivalent.
The latest deal follows an initial agreement signed between BP and Iraq in July 2024, with technical terms agreed in December and the majority of commercial terms agreed in January this year.
The agreement is subject to final government ratification. When it is confirmed, BP said it will work closely with the government to set up a new operator, which will be an unincorporated organisation with personnel mainly from NOC and North Gas Company along with secondees from BP.
The new operating organisation will take over operations at Kirkuk from NOC. BP also said it expects to form a standalone incorporated joint venture to hold its interests in the operator.
The project is expected to commence operations this year. The company is expected to spend up to $25 billion over the lifetime of the project, an Iraqi oil official told Reuters in early February.
Investment in the project will support economic growth, improve supply chain capability and promote job creation in Kirkuk, BP said.
The agreement "delivers access to a material new resource opportunity, within one of the world’s most prolific hydrocarbon provinces", said BP executive vice president William Lin.
"It will enable us to bring our experience of managing giant fields to realise the potential of this important asset for Iraq, working alongside and in close partnership with NOC and NGC. This opportunity is fully in line with our priority of pursuing new growth opportunities for BP," he added.
Iraq, Opec's second-largest producer behind Saudi Arabia, has faced challenges in consistently adhering to its assigned output quotas. Opec data shows that the country's oil production stood at four million barrels per day (bpd) last month, a decrease of 5,000 bpd from December.
BP was a member of the consortium of oil companies that discovered oil in Kirkuk in the 1920s. From 2013 to 2019, it worked with the Ministry of Oil and NOC on technical studies exploring the potential for redevelopment at Kirkuk.
Under the terms of the latest agreement, work will include a drilling programme, the rehabilitation of existing wells and facilities, and the construction of new infrastructure, including gas expansion projects, BP said.
The company's remuneration will be linked to incremental production volumes, price and costs. BP will be able to book a share of production and reserves proportionate to the fees it earns for helping to increase production, it said.
