TotalEnergies pins hopes on desalination for Iraq project

Reuters

• Oil fields require water injection to maintain reservoir pressure
• Plant expected to create 5m barrels of fresh water per day

TotalEnergies’ $27 billion development deal with Iraq includes building a water desalination plant crucial to Baghdad’s efforts to raise oil production, but doubts persist over the financial and logistical viability of the long-delayed project.

The multifaceted agreement signed on Monday foresees constructing a 1 gigawatt solar power plant, capturing waste gas from oil fields to make much-needed electricity, and raising crude production at the Ratawi oil field to 200,000 barrels per day from 60,000 bpd currently.

• TotalEnergies’ $27bn bet on Iraq boosts ailing oil industry
• Abu Dhabi seeks proposals for new desalination plants
• Saudi and Kuwait reassert claims to Durra oil field

“What’s significant is that TotalEnergies is committing to investing in, and fixing, a lot of the longstanding challenges that had plagued investments by other companies,” said Bill Farren-Price, an independent Middle East oil analyst.

“The big question is: how well will Total be able to deliver on the plan?”.

The Baghdad government, under Prime Minister Mohammed Shia al-Sudani, wants to nearly double Iraq’s oil production to 8 million bpd by 2028, from 4.1 million bpd in May, according to the latest Opec data.

May’s production was down from 2022’s average of 4.4 million bpd and far from a long-lapsed target of reaching 12 million bpd. 

To raise production significantly, Iraq needs more water injection capacity to maintain reservoir pressure in its rich southern fields, which account for about 90 percent of national crude production.

Deploying Iraq’s meagre fresh water supply is inadequate and socially unpopular.

Basra, the province in which most of the country’s oil production is located, receives rain for just 32 days per year. Basra’s annual rainfall totals around 150 millimetres.

“The southern fields have been starved of water for years,” said Alexandre Araman, head of Middle East Upstream research at Wood Mackenzie, the consultants.

“They need more water – without that, many wells won’t be able to continue producing oil.”

TotalEnergies’ desalination plant will produce 5 million barrels of fresh water daily, according to Patrick Pouyanne, TotalEnergies chairman and CEO, speaking at Monday’s signing ceremony.

Exxon Mobil had spent around a decade trying to build a similar plant – known as the Common Seawater Supply Project – to supply the oil fields but never succeeded in making the logistics or economics of such a scheme work, Araman said.

The US firm and Iraq abandoned talks over the plant in 2018. The project had been slated to be operational in 2013, Reuters reported.

Germany’s ILF Consulting Engineers conducted the front-end engineering and design work for the Exxon seawater project.

In a report, it said a seawater treatment facility would be built 40 kilometres south of Basra. Its first phase would produce 7.5 million barrels of water per day, with production ultimately rising to 12.5 million bpd. 

The water was intended to be transported 270 kilometres to supply eight southern fields. ILF estimated the project’s cost at $12 billion and said it would take three years to build.

“Exxon failed to make it happen, so what is the secret sauce of Total to make this doable now?”, Araman said. “There are a lot of question marks around it.”

Various international oil companies operate the fields and Araman suggested that because margins are razor thin, IOCs might prefer to let production decline versus paying water tariffs higher than their remuneration fees.

“Will they buy the water from TotalEnergies?” he said. “Who’s responsible for the infrastructure? Who’s building the water pipelines to deliver the water? What will be the cost to produce the water?”.

Electricity demands

During oil production, natural gas is typically released as a by-product. Because of infrastructure inadequacies, some countries simply burn this gas in a process known as flaring, rather than capturing and using it.

Iraq has the second-highest gas flaring volumes worldwide, according to a March report by the World Bank.

Yet domestic demand for electricity far outstrips capacity. The shortfall has widened over the past five years despite Iraq’s supply increasing by one-third, according to the International Energy Agency, which notes outages are a daily occurrence for most households.

Power cuts are especially common in summer during peak demand for air conditioning.

TotalEnergies’ deal aims to address this and provides the Iraqi government, which has been in office for less than a year, with an incentive to make it happen.

The agreement includes the so-called Gas Growth Integrated Project, which will supply gas-fired power plants with gas captured from three oilfields.

“Iraq’s power sector is terrible and the lack of reliable electricity has been a key cause of social unrest – people can see that Iraq is a major oil exporter and yet they don’t have basic services,” Araman said.

“So, fixing these problems will be key to the government maintaining its popularity.”