The finalized deal saw TotalEnergies holding the lion’s share with a 45 percent stake in the Gas Growth Integrated Project (GGIP), followed by Iraqi state-owned Basra Oil Company with 30 percent, and QatarEnergy with 25 percent.
It marks the biggest foreign investment in the conflict-ridden country’s history.
Inking the deal during a ceremony in Baghdad, Iraqi Oil Minister Hayyan Abdul Ghani and TotalEnergies CEO Patrick Pouyanne exchanged positive remarks regarding the project, which will see the energy giant build four projects for oil, gas, and renewables in southern Iraq over 25 years, largely focusing on developing Iraq’s lackluster gas infrastructure and capturing the waste product known as associated petroleum gas, which is extremely damaging to the environment and contributes to climate change, for usage.
“We have demonstrated in the last 20 months that the continuity of the force of the State of Iraq on this development and construction contract has been a reality, and it is a very strong signal to invest,” Pouyanne said, adding that the project will provide plenty of job opportunities as at least 80 percent of its workforce will be local.
“We reiterate our commitment to providing a suitable environment for international companies working in Iraq and to cooperate with them to evolve the oil, gas, and green energies industries in Iraq,” Ghani said, echoing Pouyanne’s remarks by encouraging foreign investment.
The GGIP encompasses the development of gas, production of crude oil, and the usage of sea water for the equipment of the fields for oil purposes. It also consists of a facility processing 600 million cubic feet of gas per day, which is expected to be completed in two stages over five years.
Initially signed in 2021, the contract faced a delay due to disagreements over Iraq’s stake in the deal as Baghdad demanded a 40 percent share. It was finally agreed upon in early April after five rounds of talks between Pouyanne and Iraqi Prime Minister Mohammed Shia’ al-Sudani.
According to the terms of the deal, TotalEnergies will initially invest $10 billion to recover flared gas from oilfields in southern Iraq.
Gas flaring is the process of burning excess gas produced by oil wells that is not captured or used, and is a practice that Iraq is notorious for, being second only to Russia in terms of the amount of gas burned off.
Iraq also suffers from chronic electricity shortages, especially felt when summer temperatures reach scorching levels of over 50 degrees Celsius. The high temperatures subsequently lead citizens to consume very high amounts of power.
Imports from neighboring Iran are heavily relied upon by Baghdad to power its national grid, but these imports are not stable.
On Tuesday, Iraq’s electricity ministry announced that the country had lost nearly five thousand megawatts of power due to Iran completely stopping the supply of gas to the southern regions of Iraq, as well as cutting down the exports to Baghdad and central Iraq from 45 million cubic meters to 20 million cubic meters.
According to the ministry, the funds were held in the state-run Trade Bank of Iraq and ready to be transferred to Iran, but Baghdad requires a waiver from US to transfer funds to Iran over sanctions - one it was unable to acquire.
In an effort to curb gas imports from Iran, the Iraqi government led by Sudani has taken strides to develop its vast natural gas resources through projects such as the GGIP.
Iraqi Foreign Minister Fuad Hussein earlier in late June said that the country stands to lose up to nine hours of electricity if Tehran halts gas exports.
“Iraq’s electricity is around 43% dependent on importing gas from Iran,” he told Rudaw’s Bestoon Othman. “It is strange that Iraq has gas and is a gas and oil country but imports gas, it is because there has been no investment and development in gas. When we agreed to move towards that, one of the companies was Total.”
“In the future, Iraq will become a gas country,” he added.
In April, Sudani said that gas projects and the TotalEnergies deal will make the country self-sufficient and an exporter of gas within five years.
Additional reporting by Azhi Rasul
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