BP to develop Iraq oil fields at potential cost of $25bn

Alamy via Reuters

• Rejuvenating Iraqi oil production
• Developing natural gas resource
• Performance-linked remuneration

British oil company BP has finalised an agreement with the Iraqi government to redevelop four oil and gas fields in the northern Kirkuk region.

BP is expected to invest up to $25 billion in the project over its lifetime, according to previous reports.

The deal aims to rejuvenate Iraq’s oil production capacity. It also aligns with BP’s renewed focus on fossil fuels. 

The agreement, which is subject to final ratification by Iraq’s government, includes the Baba and Avanah domes of the Kirkuk oil field, along with the Bai Hassan, Jambur and Khabbaz fields, all currently operated by Iraq’s National Oil Company (NOC).

BP’s investment will target the rehabilitation of existing facilities, initiation of new drilling programmes, and development of natural gas resources, BP said in a statement this week. Iraq needs the gas to power electricity generation.

The agreement is for an initial phase and includes oil and gas production of more than three billion barrels of oil equivalent (boe). That could rise to up to 20 billion boe.

The deal is part of Iraq’s strategy to revitalise its oil industry after years of prolonged conflict and infrastructural decay.

The project is expected to start this year, with BP working with NOC and North Gas Company and a new operator to stabilise production.

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Iraq, the second-largest Opec’s oil producer after Saudi Arabia, has a production capacity of almost 5 million barrels per day (bpd) and plans to increase it to 6 million by 2028.

Kirkuk has proven to be problematic to develop since at least 2003, although it is one of the oldest and largest oilfields in the world. Kirkuk is disputed by elements in Iraqi Kurdistan.

BP said the remuneration will be linked to incremental production volumes, price and costs. The company will be able to book a share of production and reserves proportionate to the fees it earns to help increase production.

BP was part of a group which discovered oil in Kirkuk in the 1920s but withdrew from the country in the early 1970s along with other international oil companies due to the nationalisation of Iraq’s oil industry.

It re-entered Iraq in 2009 – after the2003 US-led invasion – as the first international major returning to the country with a technical contract on the Rumaila oilfield in southern Iraq, where it has a 50 percent stake in a joint venture. 

In 2023 the French major TotalEnergies signed a $10 billion agreement to develop the Gas Growth Integrated Project in the south of Iraq to decrease gas flaring, develop a solar plant and build a long-delayed seawater desalination plant to reinject water into ageing fields.