Iraq and French energy company TotalEnergies are set to finalize a groundbreaking $27 billion energy project in the war-torn nation. The deal, which is the largest single foreign investment in Iraq, aims to develop oil and gas resources and improve the country’s electricity supply.
Under the terms of the agreement, TotalEnergies will hold a 45% stake in the Gas Growth Integrated Project (GGIP). The state-run Basra Oil Company will acquire a 30% stake, while QatarEnergy will own the remaining 25%. This partnership will see an initial investment of $10 billion to recover flared gas on three oilfields in southern Iraq, which will be supplied to power generation plants.
Additionally, the project will involve the construction of a seawater treatment plant, which will provide water injection for pressure maintenance and help increase regional oil production. This will reduce reliance on freshwater from rivers and aquifers. TotalEnergies intends to develop a 1-gigawatt solar power plant that will supply electricity to the Basra regional grid. Saudi Arabia’s Acwa Power is also expected to participate in this solar project.
Although the deal was originally signed in 2021, it faced several delays due to disputes with the Iraqi government concerning terms and shares. Iraq initially sought a 40% stake, but TotalEnergies insisted on a majority stake. However, the parties have now reached an agreement, marking a significant step towards implementing the project.
Iraq, the second-largest producer within OPEC, heavily relies on oil revenue, which accounts for nearly 95% of its budget. The country sits on around 145 billion barrels of proven oil reserves and has significant untapped natural gas reserves.
Iraq has been striving to meet its growing electricity demand, particularly during summer, when temperatures reach extreme levels. Currently, Iraq imports 1,200 megawatts of electricity and enough natural gas to generate 2,800MW from Iran. However, these imports are not stable, as seen recently when Iran slashed gas supplies in half due to a payment delay of approximately $11 billion.
To reduce its reliance on gas imports from Iran, Iraq has been actively working to develop its natural gas resources. Last month, the country invited international energy companies to participate in an energy bidding round, offering 11 gas exploration blocks in different parts of Iraq. In May, Iraq announced an appendix to a previous bidding round, offering eight oil and gasfields and five exploration sites.
Despite the challenges and ongoing power shortages, Iraq is making concerted efforts to enhance its energy capabilities and reduce dependency on external sources. The partnership between Iraq and TotalEnergies signifies a significant step forward in achieving these goals. By capitalizing on its own resources and investing in renewable energy, Iraq is taking important strides towards a more sustainable and self-sufficient energy sector.
