Iraq signed an agreement with French energy major TotalEnergies for four oil and gas projects worth $27 billion, the country's oil minister said on Sunday.
TotalEnergies will make an initial investment of $10bn in the country, with engineering investment on projects to start "immediately", according to the company's chairman and chief executive Patrick Pouyanne.
The France-based company will invest in projects to recover gas being flared across three oil fields in Iraq and use the gas to generate power from a plant with 1.5 Gigawatts capacity in the first phase. The move will help the country plug its power deficit and use its energy reserves more efficiently.
Iraq plans to eliminate gas-flaring by 2022. The World Bank estimates about 16 billion cubic metres of gas from Iraqi fields were flared in 2015, costing the economy billions in lost revenue.
TotalEnergies also plans to expand the power capacity of the plant to 3 Gigawatts in the second phase.
The French company will also undertake work in a project injecting seawater into oil fields to enhance crude recovery.
"Our ambition is to assist Iraq in building a more sustainable future by developing access to electricity for its people through a more sustainable use of the country’s natural resources such as reduction of gas flaring that generates air pollution and greenhouse gas emissions, water resource management and development of solar energy,” Mr Pouyanne said.
The company is also participating in Iraq's nascent renewables development and will build a solar power plant, with an estimated capacity of 1 Gigawatt that will supply electricity to the Basra grid.
TotalEnergies will also undertake a project to raise crude production capacity from Iraq's Artawi field to 210,000 barrels per day from the current 85,000 bpd.
The company will also invest in a gas complex adjacent to the oil field, that will capture flared gas.
The latest investment follows a dry spell for the Iraqi energy sector, which witnessed exits by a number of international oil companies.
Last month, Iraq's Cabinet approved plans submitted by BP to spin off the development of the Rumaila oilfield, the country's largest.
BP's exit comes as the oil company and its industry peers face a challenging operating environment in Iraq.
In July, oil minister Ihsan Ismael told parliament that BP and Russia's Lukoil were looking to withdraw from the country.
"The investment environment currently in Iraq is unsuitable for retaining major investors. All the big investors are either looking for another market or another partner. This is a remark that we as an investment environment are unsuitable for major partners," he said.
Shell, BP, Exxon Mobil, Lukoil and Italy's Eni are among foreign companies working in the south of Iraq.
The planned developments in Iraq demonstrate how the region with the lowest-cost hydrocarbon production can "gain access to large-scale renewable projects", said Mr Pouyanne.
On Thursday, Iraq's deputy minister Ali Allawi and Fatih Birol, the executive director of the International Energy Agency, appealed to the international community for support to help Iraq navigate energy transition.
"An energy transition that fails to engage with fossil fuel-producing countries and their needs could have profound implications for regional and international security and the stability of global energy markets," they said in an opinion column published by The Guardian.
Iraq, Opec's second-largest oil producer, is one of the least diversified exporters in the Middle East. The country, which is estimated to have 8.4 per cent of the world's proven reserves of oil, derives close to 90 per cent of government revenue from the sale of crude. Baghdad suffers from the vagaries of the oil markets, which affect its ability to finance several infrastructure and utility projects in the country.