BP Signs Agreement with Iraqi Government to Boost Kirkuk Oil Production

PM Barzani criticized Baghdad’s oil deal with BP over Kirkuk as “unconstitutional” at the WEF 25, urging a trilateral meeting with Erbil, Baghdad, and international stakeholders to discuss disputed territories and ensure coordination.

Oil processing plant in the Baba Gurgur oilfield in Kirkuk. (Photo: AP)
Oil processing plant in the Baba Gurgur oilfield in Kirkuk. (Photo: AP)

Jan. 26, 2025

ERBIL (Kurdistan24) – British Petroleum (BP) has signed a significant agreement with Iraq’s Federal Oil Ministry to operate five oil fields in Kirkuk, targeting to raise production to one million barrels per day.

While this deal has the capacity to strengthen Iraq’s oil exports, it has also caused alarm about the long-term sustainability of Kirkuk’s oil reserves and field management.

Agreement Overview

The agreement was signed on Jan. 14, 2025, in London by BP and Iraqi Prime Minister Mohammed Shia al-Sudani.

It includes a production-sharing clause, permitting BP to receive a portion of production revenue, as well as monetary compensation.

According to Sirwan Mustafa, an oil industry expert, the contract indicates a change from simple operational arrangements to deeper involvement by BP in managing the fields.

BP’s goal is to increase Kirkuk’s oil production from the current 250,000-300,000 barrels per day (bpd) to one million bpd. However, this ambitious target has fueled concerns among experts and local officials.

Kurdistan Region’s Reaction

Kurdistan Region Prime Minister Masrour Barzani strongly criticized Baghdad’s unilateral deal with BP over Kirkuk, a disputed territory between Erbil and Baghdad.

Speaking to Reuters during the World Economic Forum in Davos, Barzani described the agreement as “unconstitutional.”

Read More: PM Barzani criticizes Baghdad-BP oil deal as 'unconstitutional', calls for coordination

“Disputed territories, as defined by the Iraqi constitution, cannot be unilaterally decided by either Erbil or Baghdad,” Barzani stated, calling for a trilateral meeting between Erbil, Baghdad, and international stakeholders to ensure coordination.

Despite opposing the mechanism, Prime Minister Masrour Barzani acknowledged the Kurdistan Regional Government’s (KRG) limited leverage to block the deal.

He also highlighted the financial toll that disputes with Baghdad have taken on the Kurdistan Region, noting over $20 billion in economic losses with no compensation from the federal government.

Broader Implications of the Dispute

The Kurdistan Region has faced continued challenges from Baghdad, including efforts to cut its share of oil production and the national budget.

PM Barzani rejected accusations of overproduction, pointing out that the Kurdistan Region produces only 280,000 bpd. “Why is the rest of Iraq not held accountable for exceeding production limits? These moves by Baghdad are an attempt to mislead public and international opinion,” he remarked.

The political dimension of this agreement reflects ongoing tensions over revenue-sharing and resource management. Barzani expressed frustration over Baghdad’s treatment of the Kurdistan Region, asserting, “We can no longer remain silent on how Baghdad is mistreating us and trying to cut our share.”

Security Measures and Challenges

The agreement comes with boosted security measures in Kirkuk’s Sargaran area, as the Iraqi army has increased its presence to protect BP workers.

However, Jadat Jihad, a military expert, emphasized the persistent ISIS threats in the region. He noted that past security concerns have forced foreign companies to halt operations, underlining the significance of maintaining a secure environment for BP’s activities.

Sustainability and Reservoir Management

Industry experts have raised concerns about the possible repercussions of rapidly increasing production.

Accelerating oil extraction without cautious reservoir management could damage the fields and deplete reserves prematurely, jeopardizing long-term production.

“Increasing production at such a rate raises serious questions about the sustainability of these fields,” Mustafa warned, stressing the necessity for balanced reservoir management strategies.

Local Concerns and Benefits

Local officials in Kirkuk have expressed uncertainty about the contract’s specific terms, especially in terms of benefits for the local population.

While the agreement could create jobs and contribute to Iraq’s economy, stakeholders in Kirkuk are concerned about being excluded from the potential economic gains.

The BP agreement indicates the economic potential of Kirkuk’s oil fields but also reveals considerable technical, security, and social challenges.

While the deal is anticipated to engender significant revenue for Iraq, the long-term health of Kirkuk’s oil infrastructure and its impact on the local community remain pressing concerns.

As BP begins its operations under this agreement, the balance between economic gains and sustainable management will be closely watched by both regional stakeholders and international industry observers.

 

Updated on Sunday at 12:44 PM