Iraq signs $27 billion energy deal with France's TotalEnergies

Agreement is the biggest single foreign investment signed by the Opec member

TotalEnergies chief Patrick Pouyanne and Iraqi Oil Minister Hayan Abdel Ghan sign the energy deal in Baghdad. Reuters
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Iraq on Monday signed a mega energy agreement with France’s TotalEnergies to develop oil and gas resources to improve the country’s electricity supply in the biggest single foreign investment in the nation.

The deal will help build a large energy infrastructure and generate solar power in Iraq. It was signed by TotalEnergies chief executive Patrick Pouyanne and Iraqi Oil Minister Hayan Abdel Ghani in Baghdad.

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 had announced in April.

“It is a happy event for the oil ministry to sign the final deal,” Mr Abdel Ghani said on Monday after the signing ceremony.

"The project will positively reflect on the oil and gas industry and renewable energy in Iraq and support plans and strategy of the government and the oil ministry.

"We renew our commitment to ensure the suitable environment for international oil companies working in Iraq and to co-operate with them to develop the oil and gas industry and renewable energy in Iraq."

Describing it as a "historic day", TotalEnergies' Mr Pouyanne said the project would break ground this summer and would see an "investment of $10 billion" over the next four years.

"This is the starting day," he said. "We will deliver the project in the next four years for the benefit of everyone in Iraq."

The deal was originally signed in 2021 but experienced several delays amid disputes with the Iraqi government over terms. Baghdad had wanted a 40 per cent stake but the French company insisted on a majority holding.

Iraq is Opec’s largest producer behind Saudi Arabia. Oil revenue makes up nearly 95 per cent of the country’s income.

It sits on about 145 billion barrels of proven oil reserves and on largely undeveloped natural gas totalling about 3,714 billion cubic metres.

In its struggle to meet 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.

Monday's deal consists of four primary projects, among them to invest associated gas from five oilfields which is flared now.

"Gas flaring will be stopped within the first three years as the first stage and then second stage after five years all flaring gas will be stopped at Majnoon, West Quran 2, Luais, Artawi and Toba oilfields,” Mr Abdel Ghani said.

The other projects are to boost production at Artawi oilfield to 210,000 barrels per day, build the seawater treat plant and 1-gigawatt solar power plant to supply electricity to the Basra regional grid.

Mr Abdel Ghani described it as “one of the biggest power generation projects in the region and a real beginning to invest in renewable energy in Iraq.”

Work on all segments of the project, which runs for 25 years, will start “from tomorrow”, the oil minister added.

Last week, Iran halved gas supplies to Iraq, taking 5,000MW from the national grid over a delay in payment of about $11 billion owed for gas imports, Iraqi Electricity Ministry said.

The ministry 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 or higher 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, the ministry said. But that is 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 resources.

Last month, Iraq invited international energy companies to take part in a bidding round to explore and develop natural reserves, offering 11 gas exploration blocks in various parts of the country.

In May, it 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.

Updated: July 10, 2023, 11:03 AM