Iraq awards China’s Sinopec contract to tap natural gas resources

Deal is the latest in Iraq’s efforts to develop gas resources to diversify sources of energy and reduce reliance on Iranian imports

Gas flaring at an oilfield in Iraq. The country is loking to diversify its energy resources and strengthen its power generating capacity. AFP

China’s state-run Sinopec energy company won a deal to develop a major gas field in eastern Iraq.

The contract to develop the 4.5 trillion cubic feet Mansuriya gas field will run for 25 years and could be extended for a further five years, the Iraqi Oil Ministry said on Tuesday.

The field will initially produce 50 million standard cubic feet with a target to reach 300 million cubic feet, the ministry said.  It didn't give a time frame.

Iraq currently produces 1.5 billion standard cubic feet of gas per day and plans to increase this to 4bn standard cubic feet by 2025.

During an energy bidding round in 2010, Iraq awarded the rights to develop the field to a consortium led by Turkish Petroleum Corporation, known as TPAO. A deal was then signed in 2011.

However, the consortium, which included Korea’s Gas Corporation (Kogas) and Kuwait Energy, suspended the work following a 2014 ISIS onslaught that left huge areas of western and northern Iraq under the extremist group's control.

The field, which is located in the eastern Diyala province, didn’t fall in the hands of the militants, but was located in a volatile area.

After defeating ISIS, the consortium was unable to restart the work despite requests from Iraq, prompting the ministry to cancel the deal in 2018.

The Sinopec deal is the latest in Iraq’s efforts to develop gas resources as the country looks to reduce its reliance on Iranian imports.

Last month, Opec's second-largest oil producer signed a four-deal package with France's Total to develop an oilfield, produce gas, build large energy infrastructure and generate solar energy. Oil minister Ihsan Abdul-Jabbar said the deal would lead to Total investing more than $7 billion into the country.

In its struggle to meet the growing demand on electricity 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 electricity needs.

Since imposing sanctions on Iran in late 2018, the US has been granting Iraq sanction waivers to enable it to continue importing from its neighbour until it achieves self-sufficiency.

Iraq and US company GE also reached financial close last week on a deal that will improve the reliability of seven existing power stations in the country.