20 C
Los Angeles
Saturday, April 20, 2024

TotalEnergies and Iraq Sign Landmark Deal to Transform Country’s Energy Sector

French oil significant TotalEnergies on Monday signed a long-delayed $27 billion energy deal that Baghdad hopes could lure back foreign investment to its faltering industry. The agreement paves the way for the construction of four oil, gas, and renewables projects over 25 years.

The project is the biggest by a Western company in Iraq, the company said in a statement. The deal is a critical component of Iraq’s plans to cut dependence on Iran for gas and electricity.

Baghdad has been trying to reduce its dependence on neighbors since it shook up its energy sector with a flurry of post-U.S. invasion deals a decade ago. The country sits on 145 billion barrels of oil reserves and a vast untapped natural gas resource. Still, it has struggled to attract fresh investments due to war, corruption, and sectarian tensions.

The country’s political instability has put off major oil companies like BP and Shell, and many of their smaller rivals have pulled out.

Despite the country’s substantial oil resources, it must meet energy needs amidst corruption and equipment shortages. It currently buys a third of its gas and electricity from neighboring Iran, which has threatened to cut supply due to unpaid bills. It also has regular blackouts in its capital and other cities.

The $27 billion deal with TotalEnergies is aimed at increasing oil production and boosting the country’s capacity to produce energy with four oil, gas, and renewables projects. Total will build a 1-gigawatt solar plant, a gas storage facility, an oil-field water-boosting unit, and a seawater pipeline to boost oil-field production. It will also invest in recovering flared gas from three oil fields for power generation plants and invite Saudi company ACWA Power to participate in the gas storage project in Basra.

Initially signed in 2021, the project has faced delays as Baghdad and TotalEnergies struggled to reach a final deal, with disagreements between Iraqi politicians over the terms. The project is still awaiting the approval of a new cabinet, which will be in place in March at the earliest.

A fundamental dispute in the deal was over Baghdad’s initial demand for a 40% stake in the projects, below the 50% limit set by international investment law. Baghdad later agreed to drop its demand for the stake to 30%, clearing the way for the deal’s closing.

In April, TotalEnergies and Iraq finally closed the deal after Baghdad agreed to take a more minor than initially demanded a share in the project of 30%, the company said in a statement. QatarEnergy will hold the remaining 25%.

The project could have implications for North American companies involved in the renewables industry, though it is easier to say with more details. The deal will likely lead to more investments by TotalEnergies and others in the renewables industry, which is booming as countries worldwide shift toward cleaner energy sources.

Trending Now:

Recommended for "The Publishers Weekly"

Most Popular Articles