The Iraq Petroleum Company was set up in 1920 as the Turkish Petroleum Company following the defeat and break-up of the Ottoman Empire after World War I and with the shares held by three oil companies, Anglo-Iranian Oil Company, Shell Oil Company and a French oil company, Compagnie Française des Petroles and one individual, Calouste Gulbenkian, who held 5% of the shares. It was renamed the Iraq Petroleum Company in 1929.

A concession to explore for oil in Iraq was obtained in 1925 and oil was first struck by the company in 1927. Oilfields were discovered and developed in the north of Iraq near Kirkuk and on the southern borders with Kuwait and Saudi Arabia. Oil pipelines were built to carry oil to the Mediterranean Sea at Haifa, Baniyas, Syria and Tripoli, Lebanon. The former pipeline was no longer used following the creation of Israel in 1948.

During the 1940s and 1950s, the company also obtained concessions to explore for oil in Dubai and other Gulf states. It retained a monopoly of exploration and development in Iraq until 1961, though it set up wholly owned subsidiaries such as the Basra Petroleum Company to operate in some areas.

In 1961, the revolutionary government of General Qassem nationalised 99.5 per cent of its concession areas in Iraq, leaving only the producing oilfields in the company's control. In 1971, the Iraqi government nationalised the remaining interests. This resulted in major increases in revenues for the Baath party government under Saddam Hussein to pursue massive infrastructure projects.

The Kirkuk field, originally brought online by the Iraq Petroleum Company in 1934, still forms the basis for northern Iraqi oil production. Kirkuk has over 10 billion barrels of remaining proven oil reserves. The Jambur, Bai Hassan, and Khabbaz fields are the only other currently producing oil fields in northern Iraq. While Iraq's northern oil industry remained relatively unscathed during the Iran-Iraq War, an estimated 60% of Northern Oil Company's facilities in northern and central Iraq were damaged in the Gulf War. Also, post-1991 fighting between Kurdish and Iraqi forces in northern Iraq resulted in temporary sabotage of the Kirkuk field's facilities. In 1996, production capacity in northern and central Iraq was estimated at between 0.7-1 MMBD, down from around 1.2 MMBD before the Gulf War.