BP PLC announced on Tuesday that it has finalized the contractual terms with Baghdad for a significant oil and gas exploration and production project in Iraq’s Kirkuk province. The agreement aims to rejuvenate several major oil fields, focusing on the rehabilitation and redevelopment of existing infrastructure, while also exploring new areas for future investment.
The project, which targets an initial production goal of over three billion barrels of oil equivalent (boe), covers key fields in Kirkuk, including the Baba and Avanah domes of the Kirkuk oil field, as well as the Bai Hassan, Jambur, and Khabbaz fields. These fields are currently managed by Iraq’s state-owned North Oil Company (NOC). BP’s plans are part of a broader effort to unlock up to 20 billion barrels of oil equivalent in the region, making it a pivotal project for both the company and Iraq’s energy sector.
BP, under the supervision of the Iraqi government, will create a new unincorporated joint venture, taking over operations from NOC. This new entity will largely consist of personnel from NOC and the state-run North Gas Company (NGC), with additional staff seconded from BP. Once operational, BP expects to form a standalone incorporated joint venture to hold its stakes in the project.
The scope of the agreement includes a comprehensive drilling program, the rehabilitation of existing wells, and the construction of new infrastructure, such as gas expansion projects. BP’s compensation will be linked to the increase in production, with the company receiving a share of the output based on incremental production volumes, price changes, and costs incurred.
William Lin, BP’s executive vice-president, emphasized the strategic significance of the deal, stating, “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.” Lin also noted that this initiative aligns with BP’s broader goal of pursuing new growth opportunities across its global portfolio.
However, the agreement still requires final ratification by the Iraqi government, with BP anticipating the project to kick off in 2025. This deal marks a shift from BP’s previous hesitancy to re-enter the Kirkuk area, which had been plagued by political instability and territorial disputes between the federal government and the Kurdistan Regional Government (KRG).
BP’s relationship with the Kirkuk field dates back to the 1920s, when the company was part of the consortium that discovered the region’s vast oil reserves. However, BP had suspended operations in 2020 after the expiration of a $100 million exploration contract, with reports indicating that the field studies were not promising enough to warrant an extension.
The deal comes after a memorandum of understanding between BP and the Iraqi government in August 2024, which laid the groundwork for this agreement. Furthermore, it follows the resumption of oil exports from Kurdistan after a February 2025 agreement between the Iraqi government and the KRG.
BP’s return to Kirkuk is seen as a positive step in the region’s ongoing efforts to stabilize its oil sector, though the complex political dynamics surrounding the Kirkuk oil fields remain a key factor to watch in the coming months.