BP Returns to a Northern Iraq Now Free of Islamic State

BP PLC will return to northern Iraq for the first time since Islamic State swept through the region three years ago, potentially heralding a new era of stability in one of the world's most dangerous energy-production provinces.

The move thrusts BP back into a volatile region that it fled along with Iraqi forces in 2014 as Islamic State approached. Iraqi Kurds, who have a semiautonomous region of the country nearby, defended and held Kirkuk and its oil fields for about three years but quickly ceded them in October when Iraqi forces moved in after vanquishing Islamic State.

BP's decision marks another step toward normality for oil companies working in northern Iraq. Chevron Corp. said Wednesday it would resume drilling in the area controlled by the Kurdish Regional Government, after abandoning the area during clashes between Kurdish and Iraqi forces. PAO Rosneft, Russia's state-backed oil company, has also begun working in Iraqi Kurdistan.

In an indication of how secure the area is perceived to be, Iraqi oil minister Jabar al-Luaibi and Michael Townsend, BP's executive director in Iraq, visited the Kirkuk oil fields Thursday, according to a statement from the oil ministry.

Iraqi officials said they want BP to help boost oil production from the fields around Kirkuk which is about four hours drive north from Baghdad. Iraqi officials said they want to ramp up output in the oil-rich region to 750,000 barrels a day of production--up 60% from current levels.

BP said it was simply renewing its commitment to study Kirkuk's fields. Bernard Looney, the company's chief of exploration and production, emphasized that BP wasn't "signing up to spending $1 billion or anything like that."

"It's a study and we'll see where it takes us. I wouldn't be over-hyping it," Mr. Looney said in an interview. "We'll do a little bit of work and we'll see."

Baghdad had invited BP to return to Kirkuk after routing local forces following the Kurdish referendum on independence. Kurds voted overwhelmingly to leave Iraq and form their own country, sparking a deadly backlash from Baghdad.

BP is one of Iraq's largest foreign partners. It operates Iraq's largest oil field in the south and heeded Baghdad's warnings several years ago to not work with the Kurdistan Regional Government.

Write to Benoit Faucon at benoit.faucon@wsj.com and Sarah Kent at sarah.kent@wsj.com

(END) Dow Jones Newswires

January 18, 2018 08:29 ET (13:29 GMT)