Total inks $27bn energy pact with Iraq as big deals still elude Nigeria
Iraq’s government and TotalEnergies agreed on a $27bn package of investment deals aimed at boosting oil and gas output and reducing power outages in oil cartel Opec’s second-biggest producer.
The French energy company will invest $10bn in the projects over seven years, Iraq oil minister Ihsan Abdul Jabbar said at a ceremony in Baghdad.
In Nigeria, vast reserves of oil and gas have generated great riches but are also blamed for fostering conflict, corruption and poverty.
After years of bad policies and stagnant production in Nigeria, the country’s leaders now want to almost triple its crude production level just as a warming world seeks to accelerate a move away from fossil fuels.
Under a newly law which cuts taxes levied on energy companies to more globally competitive levels, production royalties will now range from 5% to 15%, depending on where oil fields are located, down from the previous range of 7.5% to 20%.
Nigeria currently pumps about 1.5 million barrels of oil a day and down from a peak of 2.5 million in 2005, a decline attributed to a lack of investment in new wells, oil theft and its adherence to quotas set by the Organization of Petroleum Exporting Countries.
The country attracted just 4% of the $70 billion committed to Africa’s oil and gas sector from 2015 to 2019, partly due to uncertainty over its regulatory environment, according to accounting firm KPMG.
Bloomberg reports that work on the Iraqi projects will start in then southern region by the end of the year, TotalEnergies CEO Patrick Pouyanne said at the event.
Under the agreement, TotalEnergies will invest in the large Ratawi oilfield in the southern province of Basra, and bring expertise in seawater injection to the region’s oil wells to maintain their production.
TotalEnergies will also help Iraq to capture natural gas associated with several oilfields in the region and will build a large solar plant.
The agreement marks the biggest investment by a foreign company in Iraq, Abdul Jabbar said.
The country faces frequent electricity blackouts with infrastructure investment in the oil-rich nation hobbled by years of conflict, terrorism, and insecurity.
While Iraq pumps about 4-million barrels a day of oil, more than any other member of the Opec other than Saudi Arabia, international companies also have been put off in recent years by tough contractual terms, payment delays and political instability.
Benefits of this deal to Iraq are immense.
Making better use of its own gas could help Iraq reduce its dependence on imports of the fuel from Iran — on which it relies for power generation.
By stopping flaring from its own fields, Iraq could use gas that’s now wasted to generate power.
Using seawater to boost pressure in oil wells will help preserve Iraq’s main rivers for other uses as reserves are strained by global warming.
For TotalEnergies, the projects will boost the company’s modest presence in Iraq, and extend its expansion across the Middle East and North Africa after earlier deals in Libya, Qatar, and Abu Dhabi.
Still, the energy major’s quest for low-cost resources isn’t without risks.
Its liquefied natural gas plant in war-torn Yemen has been idled since 2015, and the construction of an LNG facility in Mozambique is on hold for at least a year as the government seeks to contain terrorist attacks in the area.