By Aref Mohammed and Ahmed Rasheed
BAGHDAD (Reuters) – Oil major BP is expected to spend up to $25 billion over the lifetime of a project to redevelop four Kirkuk oil and gas fields, a senior Iraqi oil official told Reuters, as Baghdad seeks to win back foreign investment.
Provided the deal is signed, which the official said could be over the coming weeks, it would mark a breakthrough for Iraq, where output has been constrained by years of war, corruption and sectarian tensions.
Even so it is the second-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC), behind only Saudi Arabia.
The senior official with direct knowledge of the issue said BP would invest between $20 billion and $25 billion over a profit-sharing agreement that would last more than 25 years.
BP did not immediately respond to a request for comment on the size of the deal, which has not previously been made public.
The Iraqi official requested anonymity because he was not authorised to speak publicly on the issue.
The prospective BP agreement would be the second major deal between Iraq and an international oil company in as many years after an agreement in Basra with TotalEnergies, valued at around $27 billion.
IRAQ’S DOMESTIC NEEDS
The BP deal is focused on rehabilitating facilities in four oilfields and developing natural gas to support Iraq’s domestic energy needs.
The official said technical and economic negotiations were progressing well and final contracts could be signed in the first half of February and possibly by the end of this week.
Under the terms of the contract, BP would boost crude production capacity from the four oilfields in Kirkuk by 150,000 barrels per day (bpd) to raise total capacity to at least 450,000 bpd in 2-3 years, the official said.
That compares with current capacity of 300,000 bpd, according to three officials from the state-run North Oil Company (NOC).
Under the profit-sharing model being discussed, the senior oil official said BP would be able to recover costs and start making profits once it has increased output beyond current levels.
BP has deep knowledge of the Kirkuk fields.
It was a member of the consortium of companies that discovered oil in Kirkuk in the 1920s and has estimated the area holds about 9 billion barrels of recoverable oil.
The oil major and the Iraqi oil ministry signed in 2013 a letter of intent to study developing Kirkuk but that deal was put on hold in 2014 when the Iraqi military collapsed in the face of Islamic State’s advance in northern and western Iraq, allowing the Kurdish Regional Government (KRG) to take control of the Kirkuk region.
Baghdad regained full control of the deposit from the KRG in 2017 after a failed Kurdish independence referendum.
BP then resumed its studies on the field, but in late 2019 it pulled out of the oilfield after its 2013 service contract expired with no agreement on the field’s expansion.
BP holds a 50% stake in a joint venture operating the giant Rumaila oilfield in the south of the country, where it has been operating for a century.
(Reporting by Aref Mohammed and Ahmed Rasheed; editing by Maha El Dahan and Barbara Lewis)
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