Iraq agrees to 30% stake in TotalEnergies' $27bn energy project

The Arab country signed an agreement with the French energy major in 2021 to develop oil and gas and renewable energy projects

Iraq’s oil revenue crossed $60 billion in the first half of last year amid high oil and gas prices. AFP

Iraq has reached an agreement with French energy major TotalEnergies to hold a 30 per cent stake in the company's $27 billion worth of projects in the country.

In 2021, Iraq signed an agreement with TotalEnergies to develop oil and gas and renewable energy projects worth $27 billion.

While confirming all the terms of the development and production contract signed in 2021, TotalEnergies and the Iraqi government "have, through exchanges in the past months, jointly defined the necessary conditions and mutual insurances to move forward with the Gas Growth Integrated Project (GGIP)", TotalEnergies said in a statement on Wednesday.

Both sides have agreed on a 30 per cent stake for the Basrah Oil Company (BOC) in the GGIP, while TotalEnergies has "invited QatarEnergy to take a 25 per cent stake in the GGIP in agreement with the Iraqi government", the French company said.

TotalEnergies, which will hold a 45 per cent stake, said the "continuity of the voice of Iraq on the contract ... is a strong and positive signal for foreign investment in the country".

In 2021, TotalEnergies had said it would make an initial investment of $10 billion in the country. However, the projects stalled after Iraq reportedly wanted to take a 40 per cent stake, as opposed to the 25 per cent to 30 per cent stake proposed by TotalEnergies.

In February, Iraq’s oil ministry said it was keen to strike an agreement with TotalEnergies, amid reports that the energy company was planning to exit the Arab country.

“We have no problems with TotalEnergies and our relations are good and growing,” a representative for the ministry told The National on February 2.

The the GGIP's main purpose is to enhance the development of Iraq’s natural resources to improve the country’s electricity supply, according to the statement.

As per the agreements signed in 2021, TotalEnergies and its partners will invest approximately $10 billion to recover flared gas on three oilfields to supply gas to power generation plants, and to build a seawater treatment plant for providing water injection for pressure maintenance to increase regional oil production, as an alternative to the use of fresh water from rivers and aquifers.

TotalEnergies will also develop a 1-gigawatt solar power plant to supply electricity to the Basrah regional grid. In agreement with Iraqi authorities, the French company will invite Saudi Arabia's Acwa Power to join this solar project, it said.

Iraq, Opec’s second-largest producer, depends on oil revenue to meet 90 per cent of government expenditure.

The country exports about 3.3 million barrels of oil per day, while production in the semi-autonomous Kurdish region amounts to more than 450,000 bpd.

On Tuesday, Iraq's government also struck a deal with authorities in the Kurdistan region to restart oil exports, a major step forward in the long-running dispute over rights to develop and export energy.

The deal is a win for Baghdad, which wanted to assert its right to manage Kurdistan's oil resources since the 2003 US-led invasion that toppled Saddam Hussein and gave the Kurds more autonomy.

Baghdad said the agreement with Kurdistan would be implemented immediately.

“This agreement underlines the serious and sincere desire by the federal government and the Kurdistan Regional Government [KRG] to face all the problems and obstacles that we inherited," Iraqi Prime Minister Mohammed Shia Al Sudani said.

“Halting the export of the region’s oil harms Iraq’s revenues,” he said.

Iraq’s oil revenue crossed $60 billion in the first half of last year amid high oil and gas prices.

On Sunday, Iraq's oil ministry in line with its Opec+ allies announced it was implementing a voluntary output cut of 211,000 bpd to “face the challenges facing the global oil market, to strike a balance between supply and demand and market stability”.

It followed a similar move by other Opec+ members including Saudi Arabia, the UAE, Kuwait, Oman and others, who collectively announced cuts of more than 1.1 million bpd from May until the end of the year.