Iraq and TotalEnergies unlock their $10 billion megaproject

After strong tensions and long negotiations, Iraq and the French giant TotalEnergies have reached an agreement to implement a $10 billion investment announced in 2021, intended, among other things, to improve the national electricity network, which is dilapidated. and the cause of frequent cuts.

In February, the Iraqi oil ministry explained that the implementation of the contract came up against persistent disagreements, in particular about the level of Iraq’s participation in the project planned for a period of twenty-five years. The Iraqi prime minister went to Paris, and the CEO of TotalEnergies, Patrick Pouyanné, was in Baghdad this weekend at the invitation of the first, according to the French major. Eventually Baghdad, which wanted 40% of the project, agreed to reduce its stake to 30%, according to a report published Tuesday evening by the Iraqi cabinet, “given the importance of solving the problem”.

“Strong and positive signal”

In the wake of Wednesday morning, TotalEnergies announced an agreement with the government “on a 30% stake of the Basra Oil Company” in this project called “Gas Growth Integrated Project” (GGIP). The consortium will thus be composed of TotalEnergies (45%), Basra Oil Company (30%) and QatarEnergy (25%).

“Thanks to discussions over the past few months, in particular on four occasions, between the Prime Minister, Mr. Al-Soudani, and the CEO, Patrick Pouyanné, the Iraqi government and TotalEnergies have confirmed all the terms of the contract signed in 2021. and jointly defined the conditions and mutual assurances necessary to move forward on the GGIP project”, said the French group. TotalEnergies “welcomes the continuity of the word of the State of Iraq on this contract, which sends a strong and positive signal for foreign investment in the country”.

On March 21, Patrick Pouyanné had sent a warning publicly expressing his doubts about the outcome of this project, whose terms Baghdad wanted to re-examine after a change of government: “We invest for twenty years, so if the contract has to change after two years, it means that we are not going there”he had warned, during a presentation of his report on the climate.

“We know the security situation, geopolitics… I think we are bold enough to face it, but what is fundamental for me is respect for the contract. (…) I will not drag the company into such a project if we have to renegotiate all the terms. (…) I hope we find common ground (…)but we need a political response”he added, shortly after receiving his invitation to Baghdad.

Electricity and oil

A collateral victim of corruption, the Iraqi electricity network is dilapidated. Load shedding can last up to twelve hours a day. The country is however rich in hydrocarbons. TotalEnergies, present in Iraq since the 1920s, will invest with its partners in four projects, both in hydrocarbons and to produce electricity.

A project aims to “recover the gas flared on three oil fields in order to supply gas to power plants” ; another, to develop a giant solar power plant of 1 GW, “intended to supply the electricity network of the Basra region. In agreement with the Iraqi authorities, TotalEnergies has invited the Saudi company ACWA Power to participate in this solar project”.

A third project aims to increase the production of the Artawi oil field, in the center of the country, from 85,000 barrels per day to 210,000. “build a seawater treatment plant to maintain pressure from the oil fields and increase regional production”. Qatar Energy has “welcomed this opportunity to participate in such an important project for Iraq and its people”.

When the contract was signed in 2021, the Iraqi government claimed that it was the “biggest investment by a Western company” in the country. He had at the time reported a contract for a total of 27 billion euros of investment in the country’s oil, gas and solar production, but the investments amount well, at this stage, to 10 billion confirmed Wednesday.