Reuters: Iraq agrees with BP to develop oil and gas fields.. What is the compensation?, 24 AUGUST

 Baghdad-Mil  

Iraq will share profits with BP to develop huge oil and gas fields, two Iraqi oil ministry officials said on Tuesday, as the country seeks to move away from “low-margin service contracts” to boost production growth and lure back major Western energy companies .

In recent years, a number of major oil companies, including BP, have turned to other countries offering better terms. They complain that Iraq’s “conventional oil service contracts,” under which they pay a fixed amount for each barrel of oil produced after recovering costs, prevent them from benefiting from higher oil prices .

Iraq and BP, which returned after an absence of about five years, signed a preliminary agreement earlier this month to develop four oil and gas fields in the Kirkuk region of northern Iraq, an area from which BP estimates that about 9 billion barrels of oil can be extracted .

The two officials said, according to what Reuters reported, that the contracts with BP to develop the Kirkuk, Bai Hassan, Jambur and Khabbaz fields will be based on a profit-sharing model .

The two officials, who spoke on condition of anonymity because they were not authorized to speak to the press, added that the oil ministry and BP are expected to sign an agreement, the terms of which will not be disclosed, this week, under which Iraq will hand over a data package for the four Kirkuk fields and their facilities .

They added that the final agreement is expected to be completed by the end of this year. While BP said it expects to complete negotiations on the preliminary agreement by the end of 2025 .

In 2013, BP and the Iraqi Ministry of Oil signed a “Letter of Intent” to study the development of Kirkuk. However, this deal was suspended in 2014 due to political circumstances, allowing the Kurdistan Regional Government to take control of the Kirkuk area. Baghdad regained full control of the field from the Kurdistan Regional Government in 2017 after it refused to recognize the result of the Kurdistan Region’s referendum, at which point BP resumed its studies on the field .BP withdrew from the area in late 2019 after the service contract signed in 2013 expired without reaching an agreement to expand the field .

Iraq, the second largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC) after Saudi Arabia, the de facto ruler of the organization, has the capacity to produce about 5 million barrels per day .

The Kirkuk field was discovered in 1927 and represents the cradle of the oil industry in Iraq. Officials said that its fields currently produce about 245 thousand barrels per day .

BP said earlier this month that rehabilitating existing facilities and building new ones where needed, along with other measures, would stabilise production and return it to previous levels in Kirkuk.

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