Billion-barrel oil opportunity? BP’s Kirkuk deal could reshape Iraq’s energy future!

BP has reached a significant agreement with the Government of Iraq to redevelop the massive Kirkuk oil fields, paving the way for a substantial increase in oil and gas production. The deal, which also includes power and water infrastructure projects, represents a major investment in Iraq’s energy sector. However, before BP can begin operations, the agreement must receive final approval from Iraq’s Council of Ministers.

Once ratified, BP will collaborate closely with the Government of Iraq to establish a new operating entity that will assume control of the Kirkuk oil fields from the North Oil Company (NOC). This new organisation will primarily be staffed by personnel from NOC and the North Gas Company (NGC), alongside BP secondees. BP has also outlined plans to form an incorporated joint venture that will hold its interests in the operator, ensuring long-term commitment to the region.

This development follows a memorandum of understanding (MoU) signed between BP and Iraq in July 2024, with technical terms finalised in December and commercial agreements largely settled in January 2025. BP had previously worked on assessing the potential of the Kirkuk oil fields from 2013 to 2019.

How Significant Is the Kirkuk Oil Field to Iraq’s Energy Industry?

Kirkuk remains one of Iraq’s most crucial oil fields, historically producing up to one million barrels per day. The latest agreement covers an initial phase of development that targets oil and gas production exceeding three billion barrels of oil equivalent. The deal includes the Baba and Avanah domes within the Kirkuk oil field, as well as three adjacent fields—Bai Hassan, Jambur, and Khabbaz—all currently operated by NOC.

The broader Kirkuk region is believed to contain up to 20 billion barrels of oil equivalent, positioning this agreement as a transformative opportunity for Iraq’s energy landscape. However, past mismanagement of the Kirkuk oil field, including the reinjection of low-quality fuel oil under Saddam Hussein’s regime, has led to increased oil viscosity, making extraction more challenging. Addressing these technical issues will be key to maximising output from the field.

Why Is BP Investing in Kirkuk’s Oil Redevelopment?

BP’s investment in Kirkuk aligns with its broader strategy of pursuing high-value hydrocarbon projects worldwide. William Lin, BP’s executive vice president, highlighted that the agreement strengthens BP’s long-term partnership with Iraq and provides access to a major untapped resource. He also emphasised that BP’s expertise in managing giant oil fields would play a crucial role in optimising Kirkuk’s production potential.

Under the terms of the deal, BP will collaborate with NOC, NGC, and the newly established operator to stabilise and enhance production. This will involve a drilling programme, rehabilitation of existing wells, and the construction of new infrastructure, including gas expansion projects. BP’s remuneration will be linked to incremental production volumes, market prices, and operational costs, allowing it to book a share of reserves based on its contribution to production growth.

This investment is expected to generate economic opportunities in the Kirkuk region, driving job creation and strengthening the local supply chain. BP has confirmed that the project fits within its disciplined financial framework and meets its investment return criteria. The company expects operations to commence in 2025.

How Has Kirkuk’s Oil Industry Been Affected by Regional Conflicts?

Kirkuk has been at the centre of territorial and political disputes for decades. The oil field was first discovered in 1927 by the Turkish Petroleum Company, and commercial production began in 1934 under the Iraq Petroleum Company (IPC). The field remained a key driver of Iraq’s northern oil production for decades.

In recent years, Kirkuk has been subject to geopolitical tensions. In 2014, during the height of the fight against ISIS, the Kurdistan Regional Government (KRG) seized control of the Kirkuk oil field and the nearby Bai Hassan field, sparking tensions with the central government in Baghdad. The dispute escalated further following the 2017 Kurdish independence referendum, prompting Iraqi forces to retake control of Kirkuk’s oil fields.

Despite these challenges, Iraq has been keen to attract foreign investment to stabilise and expand production at Kirkuk. BP’s agreement signals renewed efforts to enhance Iraq’s oil output, modernise its infrastructure, and strengthen energy security.

What Are the Potential Challenges for BP in Iraq?

While BP’s agreement marks a major step forward, several challenges remain. Iraq’s regulatory environment, security risks, and political dynamics could impact the project’s execution. The need for extensive rehabilitation of Kirkuk’s aging infrastructure also presents technical hurdles that BP must address to achieve production targets.

Furthermore, global oil market conditions and Iraq’s adherence to OPEC production limits could influence the financial viability of BP’s investment. Analysts will be closely monitoring how BP navigates these complexities to ensure the success of the Kirkuk redevelopment programme.

How Will BP’s Kirkuk Deal Impact Global Energy Markets?

If successfully implemented, the redevelopment of the Kirkuk oil field could significantly boost Iraq’s oil production capacity, contributing to global supply. With oil prices fluctuating due to geopolitical uncertainties and demand shifts, increased production from Kirkuk could help stabilise markets.

BP’s investment also signals confidence in Iraq’s energy sector, potentially encouraging further foreign investments. As Iraq continues to position itself as a key player in global oil markets, the success of BP’s project could shape the country’s long-term economic and energy strategies.

What Comes Next for BP and Iraq?

BP’s Kirkuk redevelopment agreement now hinges on final government approval. Once ratified, BP and Iraq’s Ministry of Oil will move forward with setting up the new operator and launching initial production-enhancement activities.

Looking ahead, BP is also exploring additional energy investments in Iraq, including power generation, solar projects, and wider exploration opportunities. These efforts align with the company’s broader objective of optimising its global portfolio while supporting Iraq’s ambitions for energy sector development.

For Iraq, the deal represents a critical opportunity to revitalise its northern oil sector, attract further investment, and strengthen its position in global energy markets. As the agreement moves towards implementation, industry observers will be closely watching how BP and Iraq navigate the challenges and opportunities ahead.