BP is spinning off its assets in Iraq by setting up a joint venture with PetroChina which will manage Iraq’s largest oilfield Rumaila as the UK-based supermajor is looking to invest more in low-carbon energy sources and become a net-zero business by 2050.
BP and PetroChina are creating a new standalone joint venture company, Basra Energy Co. Ltd., to run Rumaila together with Iraqi state-held Basra Oil Company, BP said in a statement carried by Bloomberg. The new venture will have access to external financing, the supermajor said.
The new joint venture will operate Rumaila through 2034, when the current contract expires, and will allow BP and PetroChina to continue investing in the oilfield’s operations, the supermajor said in a statement to Reuters.
The Iraqi government approved on Tuesday BP’s spin-off plan, Iraq’s oil minister Ihsan Abdul Jabbar Ismaael said in a separate statement.
BP’s spin-off in Iraq doesn’t come as a surprise. Reports have been circulating for more than two months that the supermajor was considering creating a separate company to manage its Iraqi assets.
In June, The Wall Street Journal reported that BP was considering spinning off its oil assets in Iraq, including its holding in the world’s third-largest oilfield, Rumaila. BP was said to be working on the plan to create a new company together with China National Petroleum Corporation (CNPC), the owner of PetroChina, which is BP’s partner in the field alongside the Iraqi state-owned Basra Oil Company.
BP’s presence in Iraq began in Kirkuk in the 1920s when the company that is now known as BP helped Iraq to locate, produce, and export oil from Baba Gurgur, which was the largest oil field in the world at the time.
Rumaila, the third-largest producing field in the world, is estimated to have around 17 billion barrels of recoverable oil remaining, according to BP.
With BP as an operator, the Rumaila oilfield produces 1.5 million barrels per day (bpd) of oil, or around a third of the crude oil pumped in OPEC’s second-largest producer after Saudi Arabia. Oil production at Rumaila has increased by 40 percent since 2010.
By Tsvetana Paraskova for Oilprice.com
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This is a typical and well established British behaviour. Britain joined the EU to act as a Trojan Horse for the Americans while keeping the other foot in the American camp. Eventually, it exited the EU losing the great advantages of being a member of the world’s largest trade block without receiving from the Americans reciprocal benefits for services rendered.
Something like that will happen in the Rumaila oilfield in the not-too-distant-future. China will eventually take over BP’s share and also the Running of the giant field and BP will find itself diminished in size and profits because green energy investment hardly matches the profitable business of oil and gas.
Dithering has always been a trait of the British although they tried to portray as long-term strategic thinking.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London