Iraq Secures New Investments In Its Booming Oil Industry

Editor OilPrice.com
Sat, September 11, 2021

After recent announcements of new developments in Iraq by several oil majors, the country appears to be rebounding strongly from the coronavirus pandemic, looking to maintain its reputation for oil as well as establish itself as a renewable energy innovator.

Last week, French supermajor Total announced it would be constructing four large energy projects in the south of Iraq in a $27 million deal, expected to commence before the end of 2021.

The deal includes investments in improved crude oil recovery, a gas processing plant, enhancing the Iraqi gas market through greater production more competitive prices, and a solar power plant project. The funding will allow Iraq to boost crude output in its Artawi oilfield from 85,000 bpd now to 210,000 bpd as well as achieving gas production levels of 300 million cubic feet of gas per day.

But this is just the latest in several optimistic achievements in Iraq’s oil and gas industry in 2021, following months of developments after the worldwide oil slump in 2020. In August, Iraq announced that its oil exports had risen to 3.054 million bpd from 2.9 million bpd in July. This reflects the increase in global demand for oil experienced throughout the summer months, with Iraq’s August oil revenue reaching $6.5 billion and an average barrel price of $69.

This comes after the country finally returned to production levels not seen since April 2020 in July. Iraq produced 4.18 million bpd of crude in July, demonstrating an increase of around 150,000 bpd compared to June, above the agreed-upon OPEC production cut-off point. Overall, Iraq produces the highest quantity of oil of any OPEC country apart from Saudi Arabia.

This is an important turnaround for Iraq’s oil-dependent economy, which was hit particularly hard during the coronavirus pandemic, as oil demand dropped, and prices plummeted leaving Iraq’s economy in tatters. After several months of OPEC+ production cuts, Iraq is finally able to return to its pre-pandemic output, helping to support both jobs and the national economy.

Also in August, BP and PetroChina announced a joint venture to operate Iraq’s giant Rumaila oilfield. The oilfield will be run by state-owned Basra Energy Co. Ltd., with access to funding from BP. While the oilfield will continue to emit greenhouse gasses, BP hopes that the joint venture will provide the capital needed to invest more heavily in other low-carbon projects.

British supermajor BP has worked hard in recent months to shift public opinion of its practices, investing heavily in the development of renewable energy projects, with the aim of achieving 50 gigawatts of renewable energy in its portfolio by 2030, as well as maintaining its strong oil and gas portfolio. However, its operations in Rumaila have repeatedly caused the company to come under fire as Iraq is one of the biggest methane emitters globally.

BP has been developing the major oilfield since 2010, with new operations under the joint venture planned to run until at least 2034. Rumaila is one of the world’s biggest oilfields, producing over 1.4 million bpd.

This was positive news for Iraq, following the previous withdrawal of other international supermajors from the country due to political instability and the difficulties in foreign company terms within the country’s oil industry. Until recently, BP was expected to withdraw from Rumaila as it sought more carbon-friendly oil projects. However, the government has recently improved operating conditions for foreign oil companies in a bid to keep them in the market.

Changing regulations on foreign investment in the country’s oil sector comes as part of the oil ministry’s bid to raise oil production to an 8 million bpd of oil average by 2027, almost doubling its current output.

In line with this target, the Iraqi government has already provided several foreign oil firms with operating licenses to drill new wells as well as recovering existing ones in the areas of Kirkuk, Baghdad, Basra, Maysan and Nasiriyah; BP and Eni being two of the major international firms to pick up contracts. Iraq is also in talks with China’s CNOOC over the potential recovery of 150 wells in the Bazarkan field at an estimated cost of $160 million dollars. Several of these wells were abandoned during the pandemic due to the lack of demand. However, many are still viable and could go a long way to supporting Iraq’s 2027 oil production target.

As well as investing in the future of its oil and gas industry, Iraq is also showing its openness to new renewable energy developments. This September, Iraq’s finance minister made a call for OPEC to greatly consider the movement away from fossil fuels to more sustainable renewable energy projects.

Reiterating this message, deputy prime minister of Iraq, Ali Allawi, wrote to media outlet The Guardian urging oil producers to pursue “an economic renewal focused on environmentally sound policies and technologies”, including solar and nuclear power.

In recent months, Iraq has announced several agreements with international oil and gas players for the development of renewable projects in the coming years. As well as with Total, Iraq has also signed an agreement with PowerChina ink for the development of solar energy plants expected to produce as much as 2 GW of power. This would help the country to decrease its dependence on Iranian electricity.

While Iraq looks far from prepared to back away from its oil and gas engagements, with plans to develop the sector further over the next decade, it is also looking to lead OPEC member states on renewable energy as it works with foreign supermajors on the development of solar and other alternative energy projects.

By Felicity Bradstock for Oilprice.com