The Wall Street Journal has reported sources as saying that the oil giant BP is considering spinning off its operations in Iraq into a new company that will distribute profits through dividends and hold its own debt.
BP has a long history in Iraq. In the 1920s, it helped to discover and develop the Baba Gurgur field near Kirkuk. Its presence there continued into the 1970s, when the Ba’athist government nationalised the country’s oil industry. BP, which also makes industrial products like the Castrol Hyspin spindle oil, was also the first multinational oil major to go back to Iraq in 2009.
The move would appear to be part of the company’s general shift towards low-carbon projects. Last year, it committed to a 40% reduction in oil and gas production while raising its investment in low-carbon projects to $5 billion, a tenfold increase, by 2030.
BP currently operates the Rumaila field, which is thought to have the third-largest reserves of any field in the world and produces about a third of Iraq’s oil. With operations in the field having been transformed over the past decade and no longer in need of substantial investment, Rumaila is seen as a suitable play for creating a new company that will provide a steady income.
The move follows an agreement between Italy’s Eni SpA and BP to combine their Angolan oil and gas assets in a new company under joint ownership. Some industry experts believe that other oil companies could use similar strategies to release cash for investment in emerging low-carbon energy markets.
