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BP will team up with the government of Iraq to rehabilitate and develop four oil and gas fields in the northern region of Kirkuk.
The two sides signed a preliminary agreement to that effect this week. The deal follows another one, signed in 2013, for the development of the giant Kirkuk field, which is estimated to hold some nine billion barrels of recoverable crude. That deal was put on hold a year later, however, amid the Islamic State’s advance across the Middle East.
Following the war with IS, the autonomous region of Kurdistan claimed ownership of the Kirkuk field, further challenging the deal BP had with the central Iraqi government.
In a news release on the deal, BP said it would involve “Rehabilitation of existing facilities, where required, and the construction of new facilities – including gas expansion projects – together with a drilling programme at the Kirkuk fields, has the potential to stabilize production and reverse decline, returning production from this nationally important oilfield to a growth path.”
Iraq is the second-largest oil producer in OPEC and Kirkuk is where its oil industry was born. In the past decade or so, however, oil operations in Kirkuk have been problematic due to disputes between the central government in Baghdad and the Kurdish regional government over control of the oil fields—and the oil revenues. The dispute was eventually resolved only for another crisis to emerge, this time concerning the pipeline shipping Kirkuk crude to Turkey.
The drama followed an International Chamber of Commerce ruling in March 2023 in a dispute between Turkey and Iraq regarding Kurdistan oil. The ICC ruled in favor of Iraq, which had argued that Turkey should not allow Kurdish oil exports via the Iraq-Turkey pipeline and the Turkish port of Ceyhan without approval from the federal government of Iraq.
As a result, shipments of oil from Kurdistan to Turkey have been suspended for over a year now, with whatever oil is still produced in the region going to local refineries. Reuters recently reported that smuggling is rife in the northern Iraqi region, with the oil getting loaded on trucks and smuggled into Turkey and Iran.
