Back in 2009, British oil and gas giant BP along with its then-Chinese partner China National Petroleum Corporation secured a technical services contract with Iraq’s state-owned South Oil Company to develop Iraq’s largest oil field – Rumaila – in the first such foreign exploration on the country’s energy sector in 40 years. The company’s activation earlier this month of a US$25 billion five-pronged oil and gas megadeal in the same country may prove even more historic.

The 2 October activation of the deal means that BP is now fully focused on developing the five huge oil fields in Iraq’s northern Kirkuk region, a senior source in the European Union’s (E.U.) energy complex exclusively told OilPrice.com last week. “From when the deal was broadly agreed [memorandum of understanding signed in July 2024, and technical terms agreed in December] to now, it [BP] had to nail down some of the legal and accounting details in the contracts, but everyone appears to be satisfied at this point, so it is full steam ahead at this point,” he said. Whether or not these precise details pertaining to BP are the same as those that have concerned other Western companies operating in Iraq at various stages is unclear. However, a senior source who works closely with Iraq’s Oil Ministry did exclusively tell OilPrice.com last year that they were certainly of major concern to France’s TotalEnergies in its US$27 billion four-pronged deal, and the reason for the delay between its initial agreement and the activation of its own projects. The same source long ago told OilPrice.com that they were the same reasons why ExxonMobil decided to leave its own huge projects in Iraq years earlier.

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That said, with any legal and accounting issues apparently now squared away, BP and Iraq’s Oil Ministry have agreed a preliminary production target of 328,000 barrels per day (bpd), according to the source. This is expected to rise to at least 450,000 bpd within the next two to three years, and then to be reassessed with a view to an increase in output and plateau production figures. The lifting cost of many of these barrels will be at or close to Iraq’s average of $2-4 per barrel (pb), which in turn is the joint lowest such figure in the world, along with Iran and Saudi Arabia. The project will last 25 years, but the contract will then be open for renewal, subject to agreement by both sides. Although the five fields — the Baba and Avanah domes of the Kirkuk oil field and the three adjacent sites of Bai Hassan, Jambur, and Khabbaz – are already estimated to hold up to 9 billion barrels of oil reserves, these are very conservative estimates, according to the E.U. and Iraqi sources. “There is at least another eleven or twelve billion barrels across the near surrounding area, and possibly much more,” said the Iraq source last week. Additionally, BP’s efforts will not just be on oil development but also on capturing the gas associated with much of that oil drilling, with the initial target being 400 million standard cubic feet per day (mmcf/d) of associated gas. The British firm is a world leader in this field, being a partner in the Basra Energy Company, which provides technical support for the Rumaila oilfield development to help reduce flaring and emissions, and works with the Basrah Gas Company to manage the gas produced at Rumaila.

This is one of the broader reasons why this deal – together with that of TotalEnergies – is so strategically important for the West in a geopolitical context. A key thrust of the U.S. and Great Britain is to split Iraq away from neighbouring Iran, which has long held enormous sway over it through its political, economic, and military proxies. In so doing, Iran has been able to exercise a multiplier effect of its own power through the wider ‘Shia Crescent of Power’, as analysed in full in my latest book on the new global oil market order. This alliance held an extraordinary sway up until very recently over the political, economic, and security trajectories of the Middle East. With Iran at its ideological centre, the Crescent comprised key strategic assets in Iraq, Syria, Lebanon, and Yemen, with inroads being made in Azerbaijan (75% Shia and a Former Soviet Union state), Turkey (25% Shia and furious at not being accepted fully into the European Union), Bahrain (75% Shia), and Pakistan (up to 25% Shia and a home to multiple terrorist groups antagonistic to the West). Core elements in this Shia Crescent alliance were also instrumental in Iran’s plan to build a ‘land bridge’ that would run via Iraq all the way to the Mediterranean coast, which would then be used by Tehran to increase arms shipments to its militant proxies for use against Israel. Another benefit for Iran was that it was able to present itself to superpower sponsors China and Russia as the gateway to the world’s largest unified pool of oil and gas reserves, which in natural resource-starved China was a major initial draw. Indeed, Iran and Iraq’s energy resources were at the heart of Beijing’s long-term foundation stone ‘comprehensive cooperation deals’ with both countries, as also analysed in depth in my latest book. These efforts have been extremely successful, with Chinese firms currently managing over a third of Iraq’s proven oil reserves and two-thirds of its production.

For these same reasons, removing Iraq from Iran’s immediate sphere of influence – and by extension from China’s and Russia’s – has been a key aim of the West, with the immediate focus being on stopping Baghdad’s continued reliance for energy supplies from its neighbour. It is a stunning indictment on the level of corruption that characterised Iraq for so long that a country so rich in oil and gas resources needs to buy in 40% of its power requirements in the form of gas and electricity from Iran. Having tried to persuade Baghdad to stop doing this and to meet its power deficit by developing its own energy resources instead, Washington moved recently to a different strategy, which is placing Iraq on a ladder of escalating sanctions against it if it does not do so. On the other side of the risk-reward equation, the TotalEnergies deal – and BP’s — offers a clear, long-term path for Iraq not just to stop having to import power from its neighbour but also to dramatically increase its crude oil exports, and to become a major natural gas and liquefied natural gas exporter too.

BP’s presence across Iraq’s hotly-disputed Kirkuk region may also carry with another broader strategic benefit for the West. Although all the British firm’s operations are in the area of Kirkuk that is controlled by the Baghdad-based Federal Government of Iraq, they are also operating tangentially to the Erbil-based semi-autonomous region of Kurdistan. This has long been a key operating base for the West in the Middle East, particularly since the continued advance of China into Iran and the rest of Iraq, among other countries in the area. As it stands, the U.S. and Great Britain want the Kurdistan Region of Iraq to terminate all links with Chinese, Russian and Iranian companies connected to the Islamic Revolutionary Guards Corps over the long term that have grown in recent years. The U.S. and Israel also have a further strategic interest in utilising the Kurdistan Region as a base for ongoing monitoring operations against Iran. On the other hand, the broad geopolitical stance of the Federal Government of Iraq (aligned perfectly with that of its key sponsors, China and Russia) – up until Donald Trump secured a second term as president, at least — was conveyed to OilPrice.com some time ago by the senior Iraq source, who said: “By keeping the West out of energy deals in Iraq, the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise.”

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