How the UAE Has Helped Western Oil and Gas Majors Return to Iraq
- Western oil and gas majors, backed by UAE investment, are returning to Iraq to curb Iranian influence and reestablish strategic control.
- The Khor Mor expansion project in Kurdistan marks a key step in the West’s renewed energy and geopolitical push in Mesopotamia.
- Washington views Abu Dhabi’s growing cooperation as crucial to balancing China and Russia’s expanding footprint in the Middle East.
The West’s push to rebuild its influence in the Middle East’s geographical and geopolitical heartland of Mesopotamia entered a new phase in recent months, with many major U.S. and European oil and gas majors returning to Iraq after a long hiatus. The key aim is to break the longstanding link between it and Iran, which has long held sway over its neighbour through its multiple political, economic, and military proxies. By doing this, the West hopes to tilt the balance of influence across the region back towards it and away from China and Russia, who exercise a similar influence over Iran as they do over Iraq. In the zero-sum game of Middle Eastern geopolitics, this would mean the West maintaining the edge over the East in terms of control over the world’s largest combined oil and gas resources, and the physical land gateway between the two blocs of global power. That said, given the West’s history in the Middle East – most notably with its military incursions into Iraq – enjoying the tacit backing of other Middle Eastern countries in these efforts is seen as crucial to the chances of success. This is where the United Aran Emirates (UAE) comes into the equation.
Within the past couple of weeks, UAE-based firms Dana Gas and Crescent Petroleum announced the beginning of gas sales from the Khor Mor gas expansion project in the semi-autonomous Kurdistan Region of Iraq (KRI) in the country’s north. The two companies are the largest shareholders in the Pearl Petroleum consortium with a 35% stake each, with the remainder consisting of 10% each for Austria’s OMV, Hungary’s MOL, and Germany’s RWE. In addition to the Kho Mor, the consortium operates the Chemchemal gas field in the KRI, too. The onset of commercial gas sales marks the completion eight months ahead of schedule of the Khor Mor site’s ‘KM250’ project, which adds 250 million standard cubic feet per day (MMscf/d) of new capacity, boosting the gas field’s total output to 750 MMscf/d, according to the firms. The KM250 facility will also produce 7,000 barrels per day of condensate and 460 tonnes per day of liquefied petroleum gas, augmenting the previous respective output of 15,200 barrels and 1,070 tonnes. Operated by Pearl Petroleum, the Khor Mor site currently meets around 80% of the KRI’s power needs. The US$1.1 billion financing for the Kor Mor expansion project came from the UAE’s Bank of Sharjah, Pearl Petroleum’s US$350-million bond, and the U.S. Development Finance Corporation. Just a day before the Khor Mor announcement, the Oil Ministry of the Federal Government of Iraq (FGI) in the south received senior figures from the UAE’s Abu Dhabi National Oil Company (ADNOC) to discuss strengthening cooperation and exploring investment opportunities in the country’s oil and gas sector. ADNOC stated that it was interested in developing projects across exploration, production, refining, and petrochemicals. Crescent Petroleum signed three 20-year contracts to oil and gas fields in Diyala province (the Gilabat-Qumar field and the Khashim Ahmer-Injana field) and in Basra province (the Khider Al-Mai block).
Boosting the KRI’s gas (and oil) output is a key component in the West’s strategy to pull the FGI in Baghdad closer to a model of greater cooperation with the semi-autonomous KRI – with which Washington and London have long maintained strong connections, as analysed in full in my latest book on the new global oil market order. In basic terms, they want the Kurdistan Region to terminate all links with Chinese, Russian, and Iranian companies connected to its Islamic Revolutionary Guards Corps over the long term. The U.S. and Israel also have a further strategic interest in utilising the Kurdistan Region as a base for ongoing monitoring operations against Iran. This is the exact opposite of the strategic intentions of China and Russia, as was relayed to OilPrice.com some time ago by a senior energy source who works closely with Iran’s Petroleum Ministry. He said: “By keeping the West out of energy deals in Iraq, the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise.”
There have been three broad phases in the superpower battle in Iraq since the U.S. military incursion into Iraq began in 2003. First, U.S. oil and gas firms – and many from Europe – invested heavily across the country to cement the West’s on-the-ground influence there. Aside from the huge sums of money involved, oil and gas firms are legally entitled to secure their operating facilities in any way they see fit, provided this is agreed to by the indigenous government. Such measures can include the permanent stationing of as many security personnel as the companies think are necessary, and the build-out of major infrastructure projects to support the oil and gas producing sites. Chinese and Russian firms were also present in Iraq – north and south – during this period, but initially trod carefully, given the ongoing U.S. and allied presence across the country. This was particularly true in China’s case, which preferred for a long period to take on multiple ‘work-only’ contracts on oil and gas fields rather than higher profile exploration and development projects, as also detailed in my latest book. The second phase saw a gearing up of activity by China and Russia after the U.S. unilaterally withdrew from the ‘nuclear deal’ with Iran in 2018, as it allowed Tehran to dramatically expand its influence again across its neighbour. Over the same period, multiple Western firms left Iraq due to this creeping influence and rising corruption across the country’s oil and gas sector. And the third phase began with the second presidential term of Donald Trump. Broadly speaking, his ‘if you’re not our friend, you’re our enemy’ approach appears to have brought renewed clarity to the global geopolitical outlook of many Middle Eastern countries.
Crucially for Washington, this appears to include the UAE, which had proved a constant concern for the administration of former President Joe Biden. As highlighted by OilPrice.com over the years, this included the discovery in late 2021 that China was secretly building a suspected military facility inside the UAE’s Khalifa Port. Just a few months later came the haughty refusal of President Sheikh Mohammed bin Zayed Al Nahyan to take an urgent phone call in early March 2022 from Biden as he sought help to deal with rising oil prices after the Russian invasion of Ukraine. As of now, a Washington-based senior source who works closely with the U.S. Treasury Department exclusively told OilPrice.com recently, all indications are that the UAE is more willing to cooperate in a manner consistent with Trump’s original ‘relationship normalisation’ model for key Middle Eastern countries. This saw the UAE become the first country to sign an ‘Abraham Accord’ with Israel on 13 August 2020. Not only is this stance a key benefit for the West’s strategy to expand its influence across the Middle East, but it is also extremely important in Washington’s efforts to position India as a political and economic counterpoint to China in the Asia-Pacific region as well.
By Simon Watkins for Oilprice.com
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