By Dmitry Zhdannikov and Ahmed Rasheed
LONDON/BAGHDAD (Reuters) – BP <BP.L> has pulled out of Iraq’s giant Kirkuk oilfield after its $100 million exploration contract expired with no agreement on the field’s expansion, dealing a fresh blow to Iraq’s hopes to increase its oil output, three sources told Reuters.
The move comes as Western energy companies reassess their operations in Iraq amid political turmoil following months of anti-government protests and a flare-up in tensions between the United States and Iran in the country.
BP informed Iraqi authorities last month that it was pulling its staff out of the oilfield in the north of the country after its 2013 service contract expired at the end of 2019, the sources familiar with the matter said.
A senior source at Iraq’s North Oil Company (NOC), which overseas the Kirkuk operations, confirmed BP’s withdrawal.
“The results of its field study for Kirkuk oilfield development have been handed over to the North Oil Company and unfortunately it was below expectations … at least for us,” the official said.
“It’s very obvious study results were not encouraging for BP to extend its operations,” he added.
The Iraqi government did not reply to a request for comment.
BP confirmed it had completed the field work and studies and said it had handed its recommendations for the development of the field to the NOC.
The London-based company did not comment on staff movements.
“In 2013, BP signed a letter of intent (LOI) with the North Oil Company of the Iraq Ministry of Oil to support field activity studies in Kirkuk. As planned, in December 2019 BP completed field work, studies and recommendations,” it said.
According to another senior NOC engineer, BP staff left their laptops with the NOC after completing the survey and technical study of the field.
Iraq was hoping BP would help it triple output from the field to one million barrels per day (bpd) – more than a fifth of Iraq’s current production and one percent of global output.
But BP’s contract was put on hold in 2014 when the Iraqi army collapsed in the face of Islamic State’s sweeping advance in northern and western Iraq, allowing the Kurdish regional government (KRG) to take control of the Kirkuk region.
Baghdad regained full control of the deposit from the regional government in 2017 after a failed Kurdish independence referendum, at which point BP resumed its studies on the field.
Kirkuk was discovered in 1927 and marks the birthplace of Iraq’s oil industry. BP and Iraq’s oil ministry signed in 2013 the letter of intent to study the development of the field with a planned spending of $100 million.
BP’s work included a three-dimensional seismic study of the field’s reservoir to expand on the existing 2D data.
Kirkuk is estimated to contain about nine billion barrels of recoverable oil, according to BP.
Most of Iraq’s crude is produced from areas managed by the central government of Baghdad, in the south, and exported from southern ports on the Gulf. The KRG exports about 300,000 bpd of crude from northern Iraq through a pipeline across Turkey.
(Reporting by Dmitry Zhdannikov and Ahmed Rasheed, additional reporting by Ron Bousso; writing by Ron Bousso; editing by Jason Neely and Mark Potter)