BP’s Future Now Depends on Iraq

It is no coincidence that on “Tony’s Tour to Rebuild BP’s Battered Reputation”, its CEO Tony Hayward will visit China next week.

BP may be getting a kicking in America, but China and Russia remain central to its plans.

BP’s embattled chief executive has already met Igor Sechin, Russia’s Deputy Prime Minister, in Moscow on Monday.

The company’s Russian affiliate TNK-BP, is even said to be interested in buying BP’s assets that the comapny is being forced to sell because of the spill.

PetroChina is also key to the BP’s plans, especially in Iraq where the two companies are collaborating on the giant Rumaila field in Iraq.

In its recent investor presentation, one of the three main areas BP was looking for growth after 2015 was in the world’s “giant fields”.

And they don’t come much bigger than Rumaila.

Indeed Rumaila was singled out in the presentation as being the key “giant field” that BP was interested in. And no wonder, as the presentation outlined the oil field has a whopping 66barrels of oil “in place”, of which 12 billion barrels has been produced, with 17plus billion barrels of further potential.

Indeed, the Independent newspaper reports this morning that the Iraqi oil rush has “gained momentum” in the wake of BP’s Gulf of Mexico disaster.

Let’s not forget the oil industry is all about risk and reward. If the risks of Iraq have seemed to be reduced by BP’s action in the Gulf of Mexico, investment will shift.

As the Independent reports: “The rush to exploit Iraq’s “super-giant” oilfields, of which it has the largest concentration in the world, has gathered impetus with unexpected speed in the wake of BP’s disaster in the Gulf of Mexico which has raised fears over deep-sea drilling. Iraq’s oil has the advantage of being both onshore and cheap to develop.”

Dr Leo Drollas, chief economist of the London-based Centre for Global Energy Studies, who has produced the first comprehensive study of the impact of the new Iraqi contracts and the consequences of an accelerated oil rush over the coming years, tells the paper “the evolution of Iraq’s oil capacity over the next 10 years promises to be the most important issue confronting Saudi Arabia in particular and Opec and the oil industry in general.”

Visiting diplomats are said to be impressed with the speed with which BP is moving to develop the Rumaila field.

And no wonder. If BP’s relief well fails in any way to plug the leak in the coming weeks, the Gulf of Mexico could be offlimits to BP for some considerable time.

If the Obama Administration really wants to punish BP it could try and seize assets in Alaska and stop it exploiting unconventional gas. Two main pillars of the company’s future will have been removed.

That would leave Russia and Iraq.

So Iraq looks increasingly important in securing the company’s future…

How history repeats itself..