Page 4 - MEOG Week 30 2021

MEOG COMMENTARY MEOG

Iraq approves TotalEnergies

contract as Exxon takes action

Iraq’s Cabinet has approved the French firm’s deal with the Ministry of Oil as Exxon
seeks arbitration over its frustrated efforts to sell its stake in West Qurna-1.

IRAQ IRAQ’S Cabinet this week approved a down to focus only on Ratawi, the broader deal
wide-ranging contract between the Ministry of seems to be largely in place and the Cabinet’s
Oil (MoO) and TotalEnergies, while US-based approval will allow the MoO to proceed with the
WHAT: ExxonMobil resorted to legal action as it seeks to contract.
Iraq’s proposed multi- sell its stake in the West Qurna-1 oilfield. Progress will mark a welcome good news
billion-dollar deal with The contrasting fortunes illustrate both the story for Iraq’s upstream, which is suffering as
TotalEnergies has been potential of the Iraqi oil sector and the chal- IOCs head for the exit amid the realignment of
given the nod by the lenges, albeit largely self-inflicted, of doing busi- corporate strategies that prioritise cleaner fuels
country’s Cabinet. ness in the country. and more stable operating environments.
WHY: Broad deal Exxon’s prolonged exit
The move comes as TotalEnergies’ deal will see the French com- The story at West Qurna-1 is quite different, with
other IOCs are taking pany carry out work on projects in oil, gas and ExxonMobil this week filing an arbitration case
steps to exit upstream oil renewables. against state-owned Basra Oil Co. (BOC), citing
contracts in Iraq. During the Cabinet’s weekly press confer- the stifling of efforts to sell its 32.7% stake in the
ence spokesman Hassan Nadhim noted that the field.
WHAT NEXT: contract covers four major projects – capturing ExxonMobil, which operates the field, has
Baghdad must act if it and processing 600mn cubic feet (17mn cubic already divested nearly half of its original 60%
is to keep Western IOCs metres) per day of gas from the Ratawi field, and is partnered by PetroChina (32.7%), Japan’s
interested. developing oil from the asset, constructing a Itochu (19.6%), Indonesia’s Pertamina (10%)
solar PV plant and leading a major project to and Iraq’s state-owned Oil Exploration Co.
process and transport seawater to onshore fields. (OEC, 5%).
The approval follows the signing of a heads Speaking to S&P Global Platts, an Exxon-
of agreement (HoA) in March for the construc- Mobil spokeswoman said that the company had
tion of a facility to produce natural gas from the an agreement in place with third parties – Pet-
southern oilfields of West Qurna-2, Majnoon, roChina and China National Offshore Oil Co.
Ratawi, Tuba and Luhais, as well as working (CNOOC) – for the sale of the stake in January,
to increase production from the Ratawi oil- but this was rejected by BOC.
field from the current 60,000 barrels per day to In comments provided to Reuters, the com-
200,000 bpd. pany added that Pertamina has exercised its
In the first phase of the project, the French right to purchase the interest that was to be sold
firm will target improving Iraq’s standing in to CNOOC.
low-carbon developments, capturing all flare gas The spokeswoman was quoted as saying:
and producing 1 GW of electricity from a solar “ExxonMobil has filed for arbitration against
PV facility. the Basra Oil Company relating to the sale of
It will also take over from ExxonMobil as lead our interest in the West Qurna-1 field. We have
developer of the Common Seawater Supply Pro- worked in good faith and in accordance with
ject (CSSP), which will treat 2.5mn bpd of seawa- the contract with the Basra Oil Co. and the gov-
ter from the Gulf and pipe it to major southern ernment of Iraq to secure their support for the
oilfields, where it will be injected to increase transaction.”
pressure in oil wells. Given the struggles Iraq The developers are paid a maximum of just
has faced in ramping up oil output, this project $1.9 per barrel of oil produced from the asset,
will be critical to Baghdad achieving its target of which equates to less than $1.2 per barrel after
raising production capacity to 8mn bpd by 2029 deduction of taxes.
from today’s level of nearly 4.7-5mn bpd. At the WQ-1 has capacity to produce 500,000 bpd of
time, the contract was reported to be worth ‘bil- oil from remaining combined oil and condensate
lions of dollars’. reserves of more than 22bn barrels in the north-
While the spokesman’s comments suggest ern portion of the broader West Qurna deposit.
that the gas capture element has been slimmed Despite its efforts to leave the TSC, Exxon

P4 www. NEWSBASE .com Week 30 28•July•2021