DUBAI (Reuters) -Iraq and oil major BP have signed a deal to redevelop four Kirkuk oil and gas fields, BP said on Tuesday, a breakthrough for Iraq, where output has been constrained by years of war, corruption and sectarian tensions.
The signing comes a day before BP plans to update investors on its strategy and is widely expected to reduce investments in renewable energy and shift back to invest more in oil and gas.
BP is expected to spend up to $25 billion over the lifetime of the project, a senior Iraqi oil official told Reuters in early February.
Under the terms of the agreement, which is subject to final ratification by Iraq’s government, BP will work with North Oil Co.(NOC), North Gas Co. (NGC) and the new operator to stabilize and grow production, BP said.
Work will include a drilling programme, the rehabilitation of existing wells and facilities, and the construction of new infrastructure, including gas expansion projects, it added.
BP said its remuneration will be linked to incremental production volumes, price and costs and will be able to book a share of production and reserves proportionate to the fees it earns for helping to increase production.
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, according to a senior Iraqi oil official.
Tuesday’s signing came after the two parties agreed on “technical issues and contractual terms, including the economic model of the project,” according to a statement from the Iraqi prime minister office.
The BP deal is focused on rehabilitating facilities in four oilfields and developing natural gas to support Iraq’s domestic energy needs.
BP was a member of the consortium of oil companies that discovered oil in Kirkuk in the 1920s. BP has estimated that the Kirkuk field holds about 9 billion barrels of recoverable oil.
The company 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 Jana Choukeir and Ahmed Rasheed, Writing by Clauda Tanios,Editing by Louise Heavens and David Evans)
