BP Considering Plan to Spin Off Iraq Operations Into New Company, Sources Say--Update
By Sarah McFarlane and Benoit Faucon
LONDON -- BP PLC is working on a plan to spin off its operations
in Iraq into a stand-alone company, according to people familiar
with the matter, as the oil giant shuffles its assets and
investment plans in its pivot toward lower-carbon energy.
The new company would hold BP's interest in Iraq's giant Rumaila
oil field -- one of the world's largest -- and be jointly owned by
China National Petroleum Corp., one of the British company's
partners at the site, the people said. The new entity would hold
its own debt, separate from BP, and distribute profits via
dividends, the people added.
The plan aims to give BP more flexibility to invest in
low-carbon energy by enabling it to reduce its spending on oil and
gas, the people said.
Such a move would underscore how some European oil companies are
backing away from decades of pioneering exploration in sometimes
challenging locations to refocus on where future energy demand is
expected to grow: low-carbon fuels and electricity.
The potential shift would have particular significance for BP
because of its history in Iraq, dating to the 1920s. In 2009, BP
was the first international oil business to return to Iraq after
the U.S.-led invasion.
To advance its goal, BP would first need to secure the agreement
of state-backed Basra Oil Company and Iraq's national oil company,
the State Organization for Marketing of Oil, or SOMO, which are
part of the Rumaila Operating Organization.
BP's plan for its Iraqi business is similar to what it recently
said it was considering in Angola, the people familiar with the
BP and Italy's Eni SpA last month said they had signed a
memorandum of understanding to combine their oil and gas assets in
Angola into a new jointly-owned company to save on costs and boost
growth. The companies plan for the new entity to be self-funded,
and have appointed advisers to help raise money for the new
Any potential new company isn't expected to change BP's
reporting of production and emissions for its Angola assets. It
isn't clear whether the plans for Iraq would affect BP's production
Consultants and analysts have said that they expect more oil
companies to pursue similar deals as a way to free-up budget.
Mature oil and natural gas fields, which don't require large
investments and provide a steady income, could be suited to such
deals, they said.
"It's the switch in mentality for the oil-and-gas operations
from being a growth engine to a cash cow," said Biraj Borkhataria,
analyst at RBC Capital Markets.
Major European oil companies including BP, Royal Dutch Shell PLC
and TotalEnergies SE have said they plan to reduce their dependence
on fossil fuels in the coming years and curb emissions by shrinking
their oil production and investing more in low-carbon energy.
BP last year committed to increasing its low carbon investments
10-fold to $5 billion by 2030, at the same time as reducing its oil
and gas output by 40%.
Iraq's Rumaila is one of the world's largest oil fields and has
been a cornerstone in BP's portfolio. The company was involved in
the discovery of the field in 1953, and the site now accounts for
roughly a third of Iraqi's annual crude production.
BP is one of Iraq's largest foreign partners. The country has
been attractive to major oil companies because its crude is
relatively easy and cheap to extract, although political
instability has at times tempered some interest.
In 2009, BP and CNPC won the rights to develop Rumaila, securing
a 20-year technical servicing contract, which was then extended by
5 years to December 2034. BP is the lead contractor with 47.6%,
while CNPC has 46.4% and SOMO has 6%.
In the past three years, some companies have left Iraq while
Shell handed over its Majnoon field operations to Basra Oil Co.
in 2018 and more recently Exxon Mobil Corp. has sought to leave.
Earlier this year, Exxon held talks to sell its position in the
West Qurna 1 field to the government, according to people familiar
with the matter. Exxon and the Iraqi government declined to comment
on those talks.
Meanwhile, Chevron Corp. signed a memorandum of understanding
with the government last year including exploration activities in
--Ben Dummett contributed to this article.
Write to Sarah McFarlane at email@example.com and Benoit
Faucon at firstname.lastname@example.org
(END) Dow Jones Newswires
June 11, 2021 11:53 ET (15:53 GMT)
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