By John Lee.
BP has reached a contractual agreement with the Government of Iraq to invest in the rehabilitation and redevelopment of several giant oil fields in Kirkuk.
The agreement, signed in Baghdad on Tuesday under the patronage of Prime Minister Mohammed Shia Al-Sudani, encompasses oil, gas, power and water development, with potential for future exploration investment.
The agreement covers four main fields in Federal Iraq -- the Baba and Avanah domes of the Kirkuk oil field, along with Bai Hassan, Jambur and Khabbaz -- all currently operated by the North Oil Company (NOC). The initial phase includes oil and gas production exceeding three billion barrels of oil equivalent, while the wider resource opportunity across the contract area is believed to include up to 20 billion barrels of oil equivalent.
William Lin, executive vice president at BP, said:
"This agreement builds on our longstanding and strategic relationship with the Government of Iraq and delivers access to a material new resource opportunity, within one of the world's most prolific hydrocarbon provinces.
"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 as we strengthen and high-grade our portfolio across the world.
"We thank the Government of Iraq for the trust and privilege to deepen our cooperation in-country."
The agreement follows a memorandum of understanding signed in July 2024, with technical terms agreed in December and most commercial terms finalised in January. It also builds upon BP's previous work on the Kirkuk fields from 2013 to 2019. The company was originally part of the consortium that discovered oil in Kirkuk in the 1920s.
Upon endorsement by the Iraqi Council of Ministers, BP will work with the government to establish a new operator-an unincorporated organisation comprising primarily personnel from the North Oil Company and North Gas Company (NGC), with BP secondees. BP subsequently expects to form a standalone incorporated joint venture to hold its interests in the operator.
Under the terms of the agreement, BP's work will include a drilling programme, rehabilitation of existing wells and facilities, and construction of new infrastructure, including gas expansion projects. The agreement also covers the development of associated gas and the rehabilitation and expansion of North Gas Company facilities, as well as the construction of a 400-megawatt power station.
BP's remuneration will be linked to incremental production volumes, price and costs, allowing the company to book a share of production and reserves proportionate to the fees earned for helping increase production. The project is expected to commence in 2025 and meets BP's investment returns criteria.
The development aims to provide significant economic benefits to the Kirkuk region, including job creation across various specialisations, engagement of local companies, implementation of social benefit projects, and skills development for engineering and technical personnel from the North Oil Company and North Gas Company.
(Sources: BP, Iraqi Ministry of Oil)
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