BP plans to spin off its Iraqi oil assets into separate company

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BP is considering spinning off its oil assets in Iraq, including its holding in the world’s third-largest oilfield, into a company separate from the supermajor, which has set its sights on investing more in clean energy in coming years, sources with knowledge of the plan told The Wall Street Journal.

BP is reportedly working on the plan to create the 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 (BOC), according to the Journal’s sources.

If BP spins off its Iraqi operations, this will be highly symbolic of the course the UK major wants to take in the energy transition, considering that the energy giant has been working and investing in Iraq for nearly 100 years.

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.

According to the Journal’s sources, the spin-off plans for Iraq could be similar to the plans BP has recently announced for its oil operations in Angola.

Last month, BP and Italy’s Eni said  they would explore combining their respective Angolan interests into a new self-funded joint venture. The companies have appointed advisors that will support them in raising finance for the new joint venture, BP said.

Spinning off oil assets into self-funded separate entities with their own debts could allow BP and other Big Oil firms to focus on investment in low-carbon energy and technologies, analysts say.