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Originally published Thursday, January 17, 2013 at 4:41 AM

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Iraq considering BP for work on Kirkuk oil field

Iraq is considering a proposal for British oil giant BP PLC to begin work on a major oil field that lies in territory contested by Baghdad and the country's Kurdish minority, officials said Thursday.

Associated Press

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BAGHDAD —

Iraq is considering a proposal for British oil giant BP PLC to begin work on a major oil field that lies in territory contested by Baghdad and the country's Kurdish minority, officials said Thursday.

If the project moves ahead, it could help reverse years of production declines at the Kirkuk oil field and strengthen BP's relationship with Iraq as the OPEC nation works to sharply boost crude output in the years ahead.

The head of the Oil Ministry's petroleum contracts and licensing division, Abdul-Mahdi al-Ameedi, said a proposal submitted by London-based BP has been sent to the Cabinet for consideration.

He declined to discuss the terms of the project, and stressed that formal negotiations have yet to begin.

"If the Cabinet approves ... to initiate discussions, we'll proceed with this with BP," he said in a telephone interview.

BP spokesman Toby Odone confirmed that the company had submitted a proposal for work in Kirkuk. He declined to give details, including the scale of any potential investment.

"It's very early ... in terms of anything significant," he said. "It would be pretty small. It's just a short-term program. ... Whether it develops into something more is another matter."

Iraqi Oil Ministry spokesman Assem Jihad declined to comment.

BP is already is one of the international oil companies doing business in Iraq. It and China's CNPC won rights to develop the massive 17.8 billion barrel Rumaila field in southern Iraq during the country's first postwar oil auction in 2009.

The Kirkuk oil field was discovered in 1927. Production levels have fallen sharply over the years to less than 300,000 barrels a day as a result of mismanagement dating back to Saddam Hussein's rule as well as neglect and occasional sabotage of crucial infrastructure.

The field is at the heart of a disputed area running along the border of a largely autonomous northern region controlled by Iraq's minority Kurds, who have their own fighting force. An exchange of fire in another part of the contested region in November prompted Baghdad and the Kurds to rush troops and heavy weapons to their disputed internal border.

The Kurdish regional government criticized the BP plan as unconstitutional, insisting that work on existing fields must also include input from the Kirkuk provincial administration and the Kurds.

"The federal oil minister cannot act unilaterally, and no wise company would make itself a party to such a dispute," the Kurdish regional government said in a statement.

The Kurds have signed dozens of oil deals of their own since the 2003 U.S.-led invasion. Baghdad considers those contracts illegal and wants the central government to control Iraq's oil policy.

Having a major Western company doing work in Kirkuk could strengthen Baghdad's control over Kirkuk, which is ringed by flaming gas flares from the oil field.

Exxon Mobil Corp. infuriated Baghdad by agreeing with the Kurds to hunt for oil in their self-rule region in late 2011. That pact includes exploration of land claimed by both the Kurds and Arabs in Ninevah province.

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Associated Press writer Robert Barr in London contributed to this report.

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