The West Regains Ground In Iraq As BP Finalises Terms On Huge Kirkuk Oil Project
By Simon Watkins - Jan 09, 2025
The U.S. and its allies are leveraging energy investments to counteract China's growing influence in Iraq and the Middle East.
BP finalized terms to develop Iraq's massive Kirkuk oil fields.
TotalEnergies’ initiatives, including reducing gas flaring and advancing the CSSP, aim to improve Iraq’s energy self-sufficiency and financial stability.
The U.S. and its allies have long been looking to re-establish their presence in Iraq’s key political and economic institutions. Having arguably peaked when they removed Saddam Hussein from office in April 2003, it dwindled down the longer their military stayed on the ground. During that period, Iran was able to firmly re-establish its longstanding influence over its neighbour through a spider’s web of political, economic, and military proxies, as fully analysed in my latest book on the new global oil market order. After then-President Donald Trump unilaterally pulled the U.S. out of the Joint Comprehensive Plan of Action (JCPOA, or colloquially ‘the nuclear deal’) with Iran in May 2018, China felt able to replace Russia as the pre-dominant big power sponsor or both Iran and Iraq. This new push by Beijing into the heart of the Middle East at the U.S.’s expense was formalised with Iran in the all-encompassing ‘Iran-China 25-Year Comprehensive Cooperation Agreement’, as first revealed anywhere in the world in my 3 September 2019 article on the subject. It was then formalised with Iraq in the September 2019 ‘Oil for Reconstruction and Investment’ agreement, which was later expanded in 2021 into the all-encompassing economic, political, and military ‘Iraq-China Framework Agreement’. In both Iran and Iraq’s cases, these agreements saw China leverage financial investment into cheap oil and gas from both countries, together crucially with a heavy on-the-ground security presence, including the dual-use of Iran and Iraq’s airports and seaports by Beijing. It is little wonder, then, that the U.S. and its allies have been desperate ever since to reverse this geopolitical trend.
China’s use of big financial investment in businesses that also requires a major security presence to safeguard these interests has been at the core of its ‘Belt and Road Initiative’ (BRI) since its inception in 2013. It is perfectly legal under international law for foreign companies to place as many security personnel as they wish on the ground alongside international projects in which they have investments that they want to protect. The U.S. has used the same method to leverage its influence around the world for decades, and both Washington and Beijing have drawn their inspiration for such a simple but effective long-term colonising strategy from the British East India Company established in 1600 that functioned extremely successfully for nearly 300 years. This used trade and investment as the means to gain control over large swathes of Asia, including India and Hong Kong, with all such projects safeguarded by a British security force at one stage as large as 260,000 men. An awareness by China of the unerring similarity in its investment approach to the East India Company’s (and the U.S.’s) may be the reason why at Beijing’s insistence the original name of the BRI – the colonial-sounding ‘One Belt, One Road’ project – was officially re-translated into English in 2016 to the less totalitarian-sounding ‘Belt and Road Initiative’. The basic intention, of course, remains the same.
In seeking to extend its influence in Iraq, the West has two key advantages now that it did not have until recently. The first and most timely development is that the U.S.’s key ally in the Middle East – Israel – has severely degraded the threat from Iran, both to the West and towards its regional neighbours, including Iraq, through devastating attacks on its Hezbollah, Hamas, and Houthi proxies. The second, earlier, development was the US$27 billion four-pronged deal done by one of the companies at the forefront of the West’s move back into key strategic locations in the Middle East and North Africa – France’s oil and gas powerhouse, TotalEnergies, as also detailed in full in my latest book on the new global oil market order. Two of these four projects are especially important in this regard, with the thrust of the first being to reduce the burning off (‘flaring’) of gas released during oil drilling (‘associated gas’). By doing this, the West hopes to reduce and then eliminate the long-running need for Iraq to import up to 40% of its energy needs from Iran in gas and electricity supplies. In 2017, Baghdad committed to the United Nations and World Bank ‘Zero Routine Flaring’ initiative, aimed at ending gas flaring by 2030. At the time, Iraq flared the second largest quantity of gas in the world (after Russia) – some 17.37 billion cubic metres (bcm). Last year, it was still in second place behind Russia and was flaring almost the same amount of gas, so TotalEnergies will have its work cut out in this regards, but it is not beyond its capabilities.
The same is true for the second strategically vital project, which is to finally make progress on Iraq’s long-delayed Common Seawater Supply Project (CSSP). This is critical in enabling Iraq to dramatically increase its crude oil production up to 6 million barrels per day (bpd), or 9 million bpd, or even 13 million bpd, as also analysed in full in my new book on the new global oil market order. Achieving any of these increases will dramatically boost Iraq’s finances, which the West hopes will reduce its reliance on neighbouring Iran. The CSSP project was delayed for over a decade, as the U.S.’s ExxonMobil and the China National Petroleum Corporation (CNPC) battled it out for control until finally the U.S. firm withdrew and CNPC made no substantive progress, allowing TotalEnergies to take the contract. The project involves taking and treating seawater from the Persian Gulf and then transporting it via pipelines to oil production facilities to maintain pressure in oil reservoirs to optimise the longevity and output of fields. The initial plan for the CSSP is that it initially supplies around 6 million bpd of water to at least five southern Basra fields and one in Maysan Province and is then expanded for use in other fields.
And now into the scene steps UK oil and gas giant BP, having agreed on 19 December to the final terms to develop Iraq’s huge Kirkuk oil fields, which have an estimated 9 billion barrels of recoverable oil in place. For BP, the site will complement its 50%-stake in Iraq’s giant Rumaila field, which in turn links into TotalEnergies plans for the CSSP. The fields of Kirkuk and Rumaila (the former beginning production in the 1920s and the latter in the 1950s, with both having produced around 80% of Iraq’s cumulative oil production to date) require major ongoing water injection. According to industry figures, the reservoir pressure at the former dropped significantly after output of only around 5% of the oil in place (OIP). Rumaila, in the meantime, produced more than 25% of its OIP before water injection was required (as its main formation connects to a large source of groundwater). Although the water requirements for most of Iraq’s oilfields fall between these two cases, the needs for oilfield injection are highest in southern Iraq, in which water resources are also the least available. To reach and then sustain the higher levels of Iraq’s increased oil production profiles, the country will have total water injection needs equating to around 2% of the combined average flows of the Tigris and Euphrates rivers or 6% of their combined flow during the low season, according to the International Energy Agency. These amounts might not look too onerous, but they will have to be drawn out of the common supply that also needs to keep satisfying the needs of other big users, including agriculture. Again, though, it is not beyond the capabilities of TotalEnergies, or BP.
By Simon Watkins for Oilprice.com
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