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LONDONBP 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 BPs interest in Iraqs giant Rumaila oil fieldone of the worlds largestand be jointly owned by China National Petroleum Corp., one of the British companys 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.

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BP Considers Spinning Off Iraq Operations - The Wall Street Journal