Iraq has recently announced that it will share profits with BP for the development of the giant Kirkuk oil and gas fields. This decision marks a shift away from low-margin service contracts towards a profit-sharing model in order to accelerate production growth and attract Western majors back to the country. In recent years, several oil majors, including BP, have turned to other countries with more favorable terms, arguing that the traditional oil service contracts in Iraq hindered their ability to benefit from rising oil prices.
The preliminary agreement between Iraq and BP involves the development of four oil and gas fields in northern Iraq’s Kirkuk region. BP estimates that the Kirkuk field holds approximately 9 billion barrels of recoverable oil. The contracts for the Kirkuk, Bai Hasan, Jambour, and Khabbaz fields will be structured on a profit-sharing basis, according to two oil ministry officials who spoke to Reuters. A confidentiality agreement is expected to be signed this week, after which Iraq will provide BP with the necessary data for the project.
While BP has declined to comment further on the agreement, negotiations are expected to be finalized by the end of this year. The deal with BP to study the development of Kirkuk was initially signed in 2013 but was put on hold in 2014 due to the Iraqi military’s collapse in the face of the Islamic State’s advance. Baghdad regained control of the Kirkuk region from the Kurdish Regional Government in 2017, allowing BP to resume its studies on the field. However, BP withdrew from the oilfield in late 2019 after its service contract expired with no agreement on the field’s expansion.
As the second-largest producer in OPEC, Iraq has the capacity to produce almost 5 million barrels per day. The Kirkuk oil fields, discovered in 1927, produce around 245,000 barrels per day. BP has stated that rehabilitating existing facilities, constructing new ones as needed, and implementing other measures could stabilize production and reverse the decline at Kirkuk. The final agreement between Iraq and BP is expected to solidify the partnership and pave the way for further collaboration in the development of Iraq’s oil and gas resources.
In conclusion, the decision by Iraq to shift towards a profit-sharing model with BP for the development of the Kirkuk fields reflects a strategic shift to attract Western majors and drive production growth. The partnership between Iraq and BP marks a significant step towards maximizing the potential of Iraq’s oil and gas resources and increasing production capacity. The completion of the agreement is expected to bring economic benefits to both parties and contribute to the overall development of Iraq’s energy sector. By leveraging the expertise and resources of international oil companies like BP, Iraq aims to enhance efficiency, increase output, and secure its position as a key player in the global oil market.
