Iraq Takes a Step Towards Easing Energy Crisis with $27 Billion TotalEnergies Deal
Iraq has signed a historic $27 billion agreement with France’s TotalEnergies that could help alleviate the country’s long-standing energy crisis. This deal, the largest foreign investment in Iraq’s history, has the potential to attract international investors, reduce reliance on gas imports from Iran, and combat climate change.
The Gas Growth Integrated Project focuses on the underdeveloped Basra province, known for its vast oil reserves. Under the agreement, TotalEnergies will hold a 45% stake in the Basra Oil Company, with Iraq holding 30% and Qatar’s state-owned petroleum company taking the remaining 25%. The project aims to recover natural gas from three oil fields, currently being burned off into the atmosphere due to a lack of infrastructure. The World Bank estimates that Iraq flares around 16 billion cubic meters of gas per day.
In addition to addressing the gas flaring issue, the project also includes the construction of a seawater treatment plant to alleviate pressure on Iraq’s water resources and a solar power plant in partnership with Saudi Arabia’s ACWA Power, which will supply the local grid.
Iraq, a member of OPEC with significant oil reserves, has long suffered from mismanagement and damage to its electricity grid due to conflicts. Power outages are common, particularly during the scorching summer months, forcing many Iraqis to rely on diesel generators or endure extreme temperatures.
Furthermore, Iraq heavily depends on gas imports from neighboring Iran, which has been a point of tension with the United States. To overcome budgetary shortfalls and surging demand, Iran has reduced its gas supply to Iraq in recent years, exacerbating the energy crisis and leading to violent protests.
However, the success of the TotalEnergies deal hinges on overcoming endemic corruption and political instability that have plagued Iraq’s oil sector for decades. The power-sharing arrangement established after the 2003 U.S.-led invasion has divided the country along religious and ethnic lines, fostering corruption, inefficiency, and political gridlock.
TotalEnergies CEO Patrick Pouyanné expressed optimism about the agreement, emphasizing its potential to boost Iraq’s economy and create jobs for Iraqis. The project aims to have at least 80% of its workforce comprising local citizens. The Iraqi News Agency reported that work is set to begin in a matter of days, with tangible results expected within three years.
While this multibillion-dollar deal is a positive development for Iraq, some experts caution that challenges may arise down the line. The country’s sensitive political climate could change, affecting the implementation of the project. Nevertheless, the involvement of a major multinational company like TotalEnergies may provide a degree of protection against corruption, although the risks can never be completely eliminated.
In recent years, several oil majors have withdrawn from Iraq, which makes this deal crucial in decreasing the country’s dependence on Iranian gas imports. Overall, the project represents a step forward for Iraq in addressing its energy crisis, attracting foreign investment, and working towards a more sustainable and self-reliant energy sector.
In conclusion, Iraq’s $27 billion deal with TotalEnergies holds the potential to alleviate the country’s energy crisis, attract foreign investment, and reduce reliance on gas imports from Iran. However, challenges related to corruption, political instability, and Iraq’s sensitive political climate may pose obstacles in the project’s implementation. Nevertheless, this historic agreement marks a significant step towards a more sustainable and self-sufficient energy sector in Iraq.
