) has formally inked a letter of intent with Iraq's government
relating to the revival of Iraq's northern controversial Kirkuk
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Though the deal inked in early September was confirmed by both
the parties, no further details were revealed. BP is believed to
invest $100 million over a period of 18 months to assist Iraq in
preventing further decline in output at the field.
Any deal with BP relating to the field would be termed as illegal
by the Kurdistan Regional Government (KRG) as its opinion was not
considered in the process. BP's participation at Kirkuk has been
under discussion for over a year.
The latest 18-month deal relating to the Kirkuk is not a
technical service contract similar to the ones BP has at Iraq's
giant Rumaila oilfield in the south.
The deal would give Baghdad an experienced partner and facilitate
it in making up for the huge fall in output from Kirkuk. The
British giant is likely to work on the Baba and Avana geological
formations controlled by Baghdad. The third formation of Kirkuk,
Khurmala, is administered by the KRG and is being developed by
the Iraqi Kurdish KAR group.
The yield at the 78-year old field has come down to 280,000
barrels per day (bpd) from 900,000 bpd in 2001. The main reason
behind the decline is years of water injection and dumping of
discarded crude and products into the field.
The Iraq government has asked BP to increase production capacity
to about 600,000 bpd within five years. However, the rate of
development at Kirkuk will not be as rapid as the giant southern
fields of Rumaila, Zubair and West Qurna-1.
The yield at these southern fields has been enhanced by 600,000
bpd in just two years by BP,
BP carries a Zacks Rank #3 (Hold). However, Zacks Ranked #1
(Strong Buy) stock
SM Energy Company
) appears attractive for the short term.