Iraq is set to sign a $27-billion energy agreement with France’s TotalEnergies on Monday to develop oil and gas resources and to improve the country’s electricity supply in the biggest single foreign investment in the war-torn nation.
TotalEnergies will hold 45 per cent in the Gas Growth Integrated Project while a 30 per cent stake will go to the state-run Basra Oil Company and 25 per cent to QatarEnergy, Iraqi Oil Ministry and TotalEnergies announced in April.
The GGIP stipulates that TotalEnergies and its partners will initially invest about $10 billion to recover flared gas on three oilfields in southern Iraq to supply gas to power generation plants.
A seawater treatment plant will be built to provide water injection for pressure maintenance to increase regional oil production, as an alternative to the use of freshwater from rivers and aquifers.
TotalEnergies will also develop a 1-gigawatt solar power plant to supply electricity to the Basra regional grid. Saudi Arabia's Acwa Power is also set to join this solar project.
The deal was originally signed in 2021 but experienced several delays amid disputes with the Iraqi government over terms and the shares. Baghdad wanted a 40 per cent stake in the project, but the French company insisted on a majority stake.
Iraq is Opec’s largest producer behind Saudi Arabia. Oil revenue makes up nearly 95 per cent of the country’s budget.
It sits on about 145 billion barrels of proven oil reserves and on largely undeveloped natural gas of around 3,714 billion cubic meters.
In its struggle to meet the growing electricity demand, especially during summer, Iraq buys 1,200 megawatts of electricity and enough natural gas to generate 2,800MW from Iran, making up nearly one-third of its needs.
But these imports are not stable.
Last week, Iran slashed gas supplies to Iraq in half, taking 5,000 megawatts from the national grid over a delay in payment of around $11 billion owed for gas imports, Iraqi Electricity Ministry said.
Iraq’s Ministry of Electricity said the funds were held in the state-run Trade Bank of Iraq, ready to be transferred to Iran. But the transfers have to be approved by the US, which restricts payments to Tehran due to sanctions.
When gas supplies, currently at about 45 million cubic metres, drop, several areas in central and southern Iraq are in darkness for hours. The power cuts come as the temperatures are hovering around 50°C and surpass it in some places.
The country’s power generation stood at 24,000MW last month, an increase of 22 per cent from the same period last year, according to the Electricity Ministry. But that’s still far from the real demand of 34,000MW.
To reduce gas imports from Iran, the country has been striving to develop its vast natural gas resources.
Last month, Iraq invited international energy companies to take part in an energy bidding round to explore and develop natural gas reserves, offering 11 gas exploration blocks in different parts of the country.
In May, it also announced an appendix to the fifth bidding round held in 2018, offering 13 sites. Of those, eight are oil and gasfields and five are exploration sites.
