Iraq Seeks to Maintain Gas Momentum

Copyright © 2021 Energy Intelligence Group

Gas shortages are preoccupying governments everywhere. Iraq — unique among oil producers for having to import gas while also burning huge amounts of associated gas — has belatedly intensified efforts to exploit its huge resources, capture the gas it flares, and wean itself off costly Iranian imports. A deal with TotalEnergies last month was a possible game changer, signaling fresh thinking about the need to attract foreign investment. Talks have since opened with another European major about a big gas project in the Western Desert, Oil Minister Ihsan Ismael told the Energy Intelligence Forum last week.

Many question whether Baghdad can maintain this newfound sense of urgency, with a new government due to be formed in the coming months after elections on Oct. 10. It will take years for the gas plans to come to fruition, and the pace of progress on other projects remains uncertain. With energy consumption rising by 5%-7% a year, the gap between domestic supply and demand could widen, perpetuating chronic power outages.

Ismael is adamant that change is afoot. “I'm sure 100% that the next government will [give] the same or more support to this project,” he said, speaking of the $10 billion Total scheme that aims to capture 600 million cubic feet per day (6.2 billion cubic meters per year) of associated gas in southern Iraq.

That represents 90% of the gas flared for which Basrah Gas Co. (BGC) is not responsible, according to Ismael. He suggested the reformed Iraq National Oil Co.'s involvement in the Total project, with a stake of around 40%, proves it will have full state backing. Other foreign partners are expected to join, with Total intending to hang on to 40%-50%, CEO Patrick Pouyanne said recently.

Baghdad has, meanwhile, earmarked $3 billion for the Royal Dutch Shell-led BGC to build a new processing train over the next four years, Ismael said. He also talked up progress on a gas capture project in Nasiriyah province in the south, where a long-delayed scheme with Baker Hughes launched last month.

“Our target is to reach not less than 4 billion cubic feet per day by the end of 2025 from that associated gas … and we are now also in discussion with one of the biggest players in the energy sector about exploration and gas production in western Iraq.”

The minister declined to name the company, saying only that it is European. But an Iraqi industry source told Energy Intelligence that it is likely to be Italy’s Eni, adding: “I’m aware of their interest.” The Italian firm already operates Iraq's Zubair oil field. Whoever the ministry is talking to, renewed interest in the country is apparent among the Western majors, with Ismael saying talks with Chevron about developing four oil and gas blocks in Nasiriyah are now at an advanced stage.

The Western Desert project will cover a large area of Anbar province, where Iraqi exploration teams are already at work, and will include development of the 5.6 trillion cubic foot (160 Bcm) Akkas gas field, the minister said. Talks with the European firm began two weeks ago after negotiations with another company fell through over investment terms, he added. Back in February, Schlumberger was thought to be the front-runner to develop Akkas, and there had also been talk last year about Saudi involvement, but nothing came of it.

The country is targeting 1.5 Bcf/d of nonassociated gas by 2027, including from Akkas, in addition to the 4.5 Bcf/d of associated gas it hopes to produce in the next four years, according to the minister, as part of a policy “to give Iraq more independence and diversify its economic resources.” But the targets still fall short of the 7 Bcf/d required to meet power needs during the hot summer months, Ismael said, admitting it will take a "long time" to reach that level.

In addition to the gas push, the government has stepped up efforts to build utility-scale solar photovoltaics to help ease power shortages. The Total project includes a 1 gigawatt solar plant to supply the Basrah region. Two solar contracts signed last week with Masdar of the United Arab Emirates and a Norwegian-led consortium should add a further 1.5 GW.

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