BP, Iraq Strike Deal on Oil Development in Kurds-Claimed Province

BP PLC said Tuesday it has agreed final contractual terms with Baghdad for oil and gas exploration and production plans in Kirkuk province.

Under the deal, BP looks to “invest in several giant oil fields in Kirkuk providing for the rehabilitation and redevelopment of the fields, spanning oil, gas, power and water with potential for investment in exploration”, the company said in an online statement.

The agreement targets a production of over three billion barrels of oil equivalent (boe) in the initial phase. “It includes the Baba and Avanah domes of the Kirkuk oil field and three adjacent fields – Bai Hassan, Jambur and Khabbaz – in Federal Iraq, all of which are currently operated by the NOC”, BP said, referring to Iraq’s state-owned North Oil Co.

“The wider resource opportunity across the contract and surrounding area is believed to include up to 20 billion barrels of oil equivalent”.

Under supervision by the Iraqi government, the British energy major will form a new unincorporated company to take over operatorship from NOC. The operator will be composed mostly of personnel from NOC and North Gas Co. (NGC), also an Iraqi state-owned company. It will also have secondees from BP.

“Subsequent to this agreement, bp expects to form a standalone incorporated joint venture to hold its interests in the operator”, BP said.

“Under the terms of the agreement, bp will work with NOC, NGC and the new operator to stabilize and grow production”, it said.

“Work will include a drilling program, the rehabilitation of existing wells and facilities, and the construction of new infrastructure, including gas expansion projects.

“Under the agreement, bp’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”.

BP executive vice-president William Lin commented, “This agreement builds on our long-standing 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”.

“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”, Lin added.

The agreement needs a final ratification by the Iraqi government. “bp expects the project to commence in 2025”, the company said.

BP had stalled plans for years citing risks of political instability in the province claimed by Iraq’s autonomous region of Kurdistan.

In 2013 BP signed a deal with the Iraqi government “on providing technical assistance relating to the Kirkuk oil field”, according to the company’s annual report for that year.

In 2020 Reuters reported citing unnamed sources that BP, which was part of the consortium that discovered Kirkuk in the 1920s, had pulled out of the field after its $100 million exploration contract expired with no agreement for expansion.

The results of field studies conducted by BP “were not encouraging for BP to extend its operations”, an unnamed NOC official told Reuters in the report published January 21, 2020. BP at the time only confirmed to Reuters the company had completed field studies 2019.

Then-chief executive Bob Dudley indicated BP would not return until the political landscape stabilized.

In an address December 7, 2019, newly installed Kurdistan Regional Government (KRG) Prime Minister Masrour Barzani said the regional and federal governments were “exporting Kirkuk oil together”.

In 2021 the KRG opposed a purported proposal by the central oil minister to put Kurdistan oil fields under Baghdad’s control.

It is “entrenched in law that Kirkuk is a disputed area, under the constitution, and that its status must be resolved in line with Article 140 of the constitution, which defines the ownership of these areas”, the KRG’s Natural Resources Ministry said in a statement January 19, 2021.

In 2022, the KRG denied allegations it had taken over NOC’s Bai Hassan and Dawd Gurg oil fields in Kirkuk.

“It is clearly stipulated in the Iraqi Constitution that natural resources are the property of all Iraqis and not of a single company”, the KRG said in a statement May 14, 2022.

On August 1, 2024, BP announced a memorandum of understanding with Baghdad that paved the way for the agreement announced Tuesday.

The finalization of contract terms comes after the Iraqi government and the KRG reached an agreement on the resumption of oil exports from Kurdistan. The KRG confirmed the export resumption agreement February 5, 2025.

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