BP-Kirkuk Deal Could Be Another Step Towards Reintegrating Kurdistan Back Into Iraq’s Federal System

After the Kurdish referendum in October 2017, Prime Minister Haidar Abadi initiated a policy to force the Kurdistan Regional Government (KRG) back into the federal system. That started with sending federal forces into Kirkuk and the disputed territories. That included the seizure of the Bai Hassan and Avana Dome fields, which were producing around 45% of the KRG’s oil. The Oil Ministry just signed a planning deal with British Petroleum for Kirkuk that includes the Khurmala Dome, which is run by the Kurds. This move could deny Kurdistan another revenue source and force it to move closer to Baghdad.

In May, the Oil Ministry signed an amended Letter of Intent with British Petroleum to expand its role in Kirkuk. BP will prepare studies and boost production of the Kirkuk oil fields. That now includes Khurmala Dome which is run by the KAR Group for the Kurdistan Regional Government. Khurmala produces around 130,000 bar/day, which is roughly 1/3 of the KRG’s output. In 2013 BP originally signed with Baghdad for work in Kirkuk, but that was halted due to the war with the Islamic State which started the next year. In January 2017, BP signed a new Letter of Intent to renew that 2013 deal. BP’s role has now been expanded in the governorate.

The BP deal could be the first step in Baghdad re-asserting control over Khurmala Dome. The Kurds took over the field in June 2008 when the Peshmerga forced out Oil Ministry workers claiming that it fell within the boundaries of the KRG. In October 2017, federal forces occupied the field, but the KAR group continues to operate it. The new letter with BP only has the company surveying Kirkuk to help the Ministry plan for developing the petroleum there. When that’s done, the Ministry could try to take back operation of Khurmala Dome as part of the new strategy. If it did, that would be another major blow the Kurdish economy. It already lost the Bai Hassan and Avana fields in October, which represented 45% of the region’s petroleum production. Losing another third from Khurmala Dome would be crippling.

PM Abadi’s plan has been to reintegrate Kurdistan back into Iraq after years of moving towards independence. That includes denying it much of its revenue from the oil fields in Kirkuk, paying part of the salaries of KRG public workers, and asserting control over the region’s airports and border crossings. Taking over the Khurmala Dome would be another phase of this strategy. The Kurds ability to sustain itself would take another blow, and they would have nowhere else to turn, but towards Baghdad for funds. These are all repercussions from the ill advised referendum.

SOURCES

Al-Aqily, Ali and Lando, Ben, “Oil Ministry widens BP mandate in Kirkuk,” Iraq Oil Report, 5/8/18

Kullab, Samya, Tahir, Rawaz, Hussein, Mohammed, Mohamed, Araz, “Kirkuk crisis redraws northern Iraq’s oil map,” Iraq Oil Report, 10/18/17

Lando, Ben, “Iraq’s Khurmala oil field sees national struggle again,” UPI, 6/17/08

Paraskova, Tsvetana, “BP, Iraq Sign Deal To Triple Kirkuk Oil Production To 1 Million Bpd,” Oil Price, 5/8/18

Tahir, Rawaz, “Khurmala in the crosshairs,” Iraq Oil Report, 10/19/17