Iraq has agreed to share profits with BP from the development of its significant Kirkuk oil and gas fields, marking a shift from traditional low-margin service contracts to a more favorable profit-sharing model. This change aims to accelerate production growth and attract Western oil majors back to Iraq.
BP, returning to Iraq after nearly five years, signed a preliminary agreement to develop four fields in Kirkuk, which is estimated to hold around 9 billion barrels of recoverable oil. The Iraqi oil ministry officials indicated that the contracts will be based on profit-sharing, a departure from previous agreements that limited benefits from rising oil prices.
The officials expect a confidentiality agreement to be signed this week, after which Iraq will provide BP with detailed data on the Kirkuk fields. A final agreement is anticipated by the end of the year, with BP aiming to finalize negotiations by early 2025.
BP’s previous attempts to develop Kirkuk faced challenges, including a halt in 2014 due to security issues related to the Islamic State. Control of the region shifted back to Baghdad from the Kurdish Regional Government (KRG) in 2017, allowing BP to resume its interest.
Currently, the Kirkuk fields produce about 245,000 barrels per day, and Iraq, as a member of OPEC, has the capacity to produce nearly 5 million barrels per day. BP plans to rehabilitate existing facilities and build new ones to stabilize and potentially increase production levels at Kirkuk.