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Iraq and BP sign deal to redevelop Kirkuk oilfields

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Agreement includes drilling and infrastructure projects

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BP's remuneration linked to production increase

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DUBAI, Feb 25 (Reuters) - Iraq and oil major BP

have signed a deal to redevelop four Kirkuk oil and gas fields,

BP said on Tuesday, a breakthrough for Iraq, where output has

been constrained by years of war, corruption and sectarian

tensions.

The signing comes a day before BP plans to update investors

on its strategy and is widely expected to reduce investments in

renewable energy and shift back to invest more in oil and gas.

BP is expected to spend up to $25 billion over the lifetime

of the project, a senior Iraqi oil official told Reuters in

early February.

Under the terms of the agreement, which is subject to final

ratification by Iraq's government, BP will work with North Oil

Co.(NOC), North Gas Co. (NGC) and the new operator to stabilize

and grow production, BP said.

Work will include a drilling programme, the rehabilitation

of existing wells and facilities, and the construction of new

infrastructure, including gas expansion projects, it added.

BP said its remuneration will be linked to incremental

production volumes, price and costs and will be able to book a

share of production and reserves proportionate to the fees it

earns for helping to increase production.

BP would boost crude production capacity from the four

oilfields in Kirkuk by 150,000 barrels per day (bpd) to raise

total capacity to at least 450,000 bpd in 2-3 years, according

to a senior Iraqi oil official.

Tuesday's signing came after the two parties agreed on

"technical issues and contractual terms, including the economic

model of the project," according to a statement from the Iraqi

prime minister office.

The BP deal is focused on rehabilitating facilities in four

oilfields and developing natural gas to support Iraq's domestic

energy needs.

BP was a member of the consortium of oil companies that

discovered oil in Kirkuk in the 1920s. BP has estimated that the

Kirkuk field holds about 9 billion barrels of recoverable oil.

The company holds a 50% stake in a joint venture operating

the giant Rumaila oilfield in the south of the country, where it

has been operating for a century.