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Iraq revives $10bn deal vital to increasing its oil output

Iraq oil Reuters/Essam Al-Sudani
The 59-day oil export stoppage is estimated to have cost the Kurdistan Regional Government more than $1.5 billion.
  • Baghdad agrees long-stalled deal with TotalEnergies and QatarEnergy
  • State-owned Basrah Oil Co will own 30%, with partners owning rest
  • TotalEnergies will also build a solar power plant in Iraq

Iraq has agreed terms on a long-stalled $10 billion deal with France’s TotalEnergies and QatarEnergy. The deal includes building a seawater treatment plant, which is vital to increasing oil output in Iraq, Opec’s second largest crude producer. 

The Baghdad government wants to nearly double Iraq’s oil production to 8 million barrels per day (bpd) by 2028, from 4.4 million bpd last year.

To do so, the country needs more water injection capacity to maintain reservoir pressures at its plentiful southern fields, which account for about 90 percent of national crude production. 

TotalEnergies signed an initial deal with Iraq in September 2021 to build the seawater desalination plant and also recover flared gas from three oil fields.

This gas would then be used to make electricity. Gas flaring is a by-product of oil extraction. 

Little progress was made following the 2021 agreement, with speculation mounting that TotalEnergies could follow other oil majors such as ExxonMobil and Royal Dutch Shell in seeking to reduce its operations in Iraq or quit the country altogether. 

Now though, the French firm has agreed to take a 45 percent stake in the Gas Growth Integrated Project (GGIP) after concluding what it describes as the “the necessary conditions and mutual insurances to move forward” with the scheme, according to a company statement. 

State-owned Basrah Oil Co will own 30 percent and QatarEnergy 25 percent. The partners will invest $10 billion in GGIP.

TotalEnergies will also build a 1-gigawatt solar power plant to supply electricity to the southern Iraqi city Basra and has “invited” Saudi Arabia’s ACWA Power to join this project. 

On Tuesday Baghdad and the Kurdistan Regional Government (KRG) signed a temporary agreement to resume oil exports from the autonomous region to Turkey, Reuters reported

Kurdish oil exports via a pipeline to Turkey were halted in late March following an international arbitration court ruling that the federal government had sole legal right to export oil. 

The KRG produced about 437,000 barrels of oil per day in the three months to December 31, around 90 percent of which was exported via pipeline, according to a Deloitte report produced for the KRG. 

The KRG in 2014 began exporting oil directly, signing production deals with international oil companies, following a dispute that led the federal government to periodically withhold the region’s share of the national budget.

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