Disputes freeze a $27 billion deal between Iraq and "Total"
The terms, which have not been announced or published before, have raised officials' concerns, and sources said they are unprecedented for Baghdad
agencies Monday February 14 2022 17:47
The Iraqi Ministry of Petroleum said it expects to complete the deal with "Total Energy" after that (AFP)
A $27 billion deal between the French company " Total " and Iraq, which Baghdad had hoped for the return of the major oil companies to the country, faltered amid disagreements over terms that were canceled by the country's new government.
Iraq is facing difficulties in attracting new large investments in the energy sector, since it signed a series of deals in the post-US invasion stage more than ten years ago. The government has repeatedly reduced the targeted production levels with the departure of the international companies that concluded these agreements, due to the low return on production-sharing contracts.
New government approval
Last year, Total agreed to invest in four oil, gas and renewable energy projects in the Basra region in the south of the country over a period of 25 years. The Iraqi Ministry of Petroleum signed the agreement in September 2021, after a visit by French President Emmanuel Macron to Iraq.
Three Iraqi sources from the Ministry of Petroleum and the sector told "Reuters" that the ministry did not obtain approvals on the financial details of the deal from all government departments whose approval is required, and it has been mired in disputes since then.
After the parliamentary elections, the deal now needs the approval of the new government, including the two ministers of petroleum and finance, who will not take office until March.
And the Iraqi Ministry of Petroleum told "Reuters", that it expects to complete the deal with " Total Energy " after that.
Total Energy announced that it was making progress towards completing the deal, but added, "The agreement is subject to conditions that must be met by both parties."
The terms, which were not announced or published before, raised the concerns of Iraqi politicians, and sources closely related to the deal said that they are unprecedented conditions for Iraq.
A group of Shiite representatives to the Ministry of Petroleum wrote a letter in January, demanding to see the details of the deal, and asking why it was signed without procedures that guarantee competition and transparency.
Parliament can force the ministry to reconsider or cancel the deal.
Waiting for ten billion dollars
The sources say that under the draft terms, Total is counting on getting $10 billion in investment, the first to finance the broader project by selling oil from the Artawi oil field, one of the four projects in the broader agreement.
The Artawi field is already pumping 85,000 barrels per day, and instead of Total getting its share of it, the proceeds go to the state treasury.
Sources from the Iraqi oil sector involved in the negotiations said that Total is scheduled to receive 40 percent of the Artawi field sales.
This is a much higher percentage than between 10 and 15 percent, which investors used to obtain in previous projects through Iraqi technical service contracts, which compensate foreign companies for capital and production costs, and pay a fixed fee for crude oil.