Iraq, TotalEnergies to proceed with $27bn energy project

Iraq and TotalEnergies have agreed to proceed with the long-delayed $27bn energy project, a deal that is expected to boost the country’s oil and gas production and enhance solar energy generation.

“TotalEnergies and the Iraqi Government have, through exchanges in the past months, including on four occasions between Prime Minister Al-Sudani and chairman and CEO Patrick Pouyanné, jointly defined the necessary conditions and mutual insurances to move forward with the Gas Growth Integrated Project (GGIP),” the French energy company said in a statement.

TotalEnergies confirmed the latest developments to the deal that was signed in 2021, saying Iraq’s state-owned Basrah Oil Company (BOC) will take a 30 per cent stake in the so-called GGIP.

The French energy giant has also invited QatarEnergy to take a 25 per cent interest in the project and it will hold the remaining 45 per cent stake. The company will initially invest $10bn in southern Iraq over 25 years together with its partners—QatarEnergy and BOC.

Read: Iraq agrees to sign deal with Total to execute energy projects

The energy project mainly aims to recover flared gas on three oil fields to supply power plants and to build a seawater treatment plant to provide water injection for pressure maintenance to increase regional oil production.

TotalEnergies will also develop a 1-gigawatt (GW) solar power plant to supply electricity to the Basrah regional grid. The company has agreed with Iraqi authorities to invite Saudi Arabia’s ACWA Power to join the solar project.

🇮🇶 #Iraq: Agreement between Iraq and @TotalEnergies #OOTThttps://t.co/mx55tJSqY2

— TotalEnergies Press (@TotalEnergiesPR) April 5, 2023

Iraq’s energy project has experienced several setbacks over terms since its initial signing nearly two years ago.

The government in Baghdad said it had approved the amended 30 per cent share “due to the importance of resolving the issue and proceeding with the signing of related agreements.”

Iraq and TotalEnergies deal

Meanwhile, the revival of the project, which was beset with setbacks since 2021, is key to Iraq’s efforts to boost foreign investments and reverse the exit of oil majors from the country. The deal is also part of the government’s broader strategies to alleviate acute power outages in the country.

The first phase will include a $3bn investment by TotalEnergies in a project to inject seawater into oilfields to enhance crude recovery. The company will also invest in the Artawi oil field to increase its production capacity to as much as 210,000 barrels per day (bpd) from the current 85,000 bpd.

The French energy giant will also provide $2bn to build a processing plant for gas produced at the southern fields of West Qurna 2, Majnoon, Artawi, Tuba and Luhais.

TotalEnergies will invest in installations to help Iraq capture natural gas associated with several oil fields in the region and build a one-gigawatt solar plant to supply to the Basra regional grid.

Iraq’s oil production capacity has remained at around 5 million bpd in recent years. The second-biggest oil producer among OPEC members after Saudi Arabia has struggled to attract large-size fresh investments into its energy sector over the past years since signing a flurry of post-US invasion deals over a decade ago. Investments in the country’s hydrocarbon sector have also slowed as major international energy firms are shifting their portfolios to focus on sustainable energy amid growing environmental, social and governance concerns from investors.

Also read: TotalEnergies wins stake in $29bn Qatari gas project

Exxon Mobil, Shell and BP have all scaled back their operations in Iraq in recent years, which is contributing to the country’s dwindling production capacity.