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French energy group TotalEnergies has signed contracts worth $27bn for the production and exploitation of gas, oil and solar energy in Iraq, the country’s government announced on Sunday.
The company will make an initial investment of $10bn, chief executive Patrick Pouyanné said at the contract signing in Baghdad as the deal was unveiled.
“This is the biggest investment by a western company in Iraq,” oil minister Ihsan Abdul Jaber was reported as saying by AFP. “Setting up these projects is the challenge we face now.”
Iraq has been courting foreign investors in the hope of boosting oil output and natural gas capture as it struggles to alleviate chronic electricity failures, with serious blackouts fuelling social unrest.
As the second-largest oil producing country in the Opec, Iraq receives more than 90 per cent of its revenues from crude sales and was hit badly when the spread of coronavirus cut demand for oil and prices tumbled. The country’s gross domestic product shrank 11 per cent in 2020, according to the IMF, and poverty rose amid worsening unemployment.
The contract with TotalEnergies covers four projects over 25 years, according to a source close to the deal. One aims to transport and inject seawater from the Gulf to oilfields, where it can be used to extract oil.
A second project concerns the extraction and exploitation of gas, while the third will aim to increase crude output at one oilfield from 85,000 to 210,000 barrels of oil per day, according to a statement by Iraq’s prime minister Mustafa Al-Kadhimi.
The fourth project, constructing a solar-based power plant, is the second major solar electricity deal Iraq has signed in the past week as it attempts to harness renewable energy. The other deal was with Chinese state-owned Power China.
In recent years, Iraq has been trying to expand its renewables sector as it seeks to exploit the huge natural resource of solar energy it has, as well as align itself with the goals of the Paris Accord.
The country has also been trying to wean itself off its dependence on Iran for gas by capturing more domestically. Iraq currently flares off most of the associated gas released by oil production, a process which is damaging for the environment and wastes the gas.
TotalEnergies has also been vocal about its shift towards renewable energy production. The company recently renamed itself TotalEnergies from Total to symbolise its diversification into cleaner fuels.
This year, it became the first oil major to end its membership of the American Petroleum Institute, Big Oil’s powerful Washington lobby group, citing its stance on climate change and support for politicians who opposed the Paris agreement.
The French group has also said it would spend more than $2bn this year on electricity and clean energy, seeking 10 per cent returns on the investments.
But Pouyanné has also been explicit about what he sees as the company’s need to develop TotalEnergies’ fossil fuel businesses to help generate the cash for green investments. The group expects its oil production to remain stable and aims to expand its gas business.
TotalEnergies declined to comment further.