News last week from Iraq Oil Ministry sources that the first stage of a gas processing facility at the Halfaya oil field is now expected to come online ahead by early 2024, ahead of schedule, is crucial for the country’s future in three respects. First, it will go some way to appeasing repeated U.S. calls for Iraq to end its energy dependence on neighbouring pariah state, Iran. Second, it bodes well for progress on the similar gas capture projects that are part of the four-part US$27 billion deal with France’s TotalEnergies. And third, it highlights that there is still scope for the West to engage in future oil and gas projects in southern Iraq at least, despite China’s increasing presence there.
Halfaya is one of Iraq’s major oil fields, located south-east of Amara in the Maysan province, around 185 kilometres from the southern oil export hub of Basra. With an estimated 4.1 billion barrels of crude oil reserves in place, the current (third and final) phase of the oil development plan is to increase production capacity from 370,000 barrels a day (bpd) to 470,000 bpd. Alongside the oil is associated gas and it is the capture of this – rather than just flaring it off – that the partners in the field are now addressing. The lead operator of the entire Halfaya project is PetroChina, the parent company of China Petroleum Engineering and Construction Corporation (CPECC), with a 45 percent stake. It was CPECC that in 2019 was awarded the project to capture gas associated with oil at Halfaya. The other partners in the overall Halfaya field are TotalEnergies (with a 22.5 percent stake), Malaysia’s national oil company Petronas (22.5 percent), and Iraq’s state owned Missan Oil Company (10 percent). The plan for the gas project is to capture and process at least 300 million standard cubic feet per day (scf/d).
Related: In A World First, California Bans New Diesel Truck Sales From 2036
Iraq has for a long time been promising to do utilise its abundant associated gas supplies to provide electricity for its power grid, in the first instance, and then to monetise it through exports at some point after that, rather than just burning it off. Baghdad some time ago signed up to the United Nations and World Bank ‘Zero Routine Flaring’ initiative, aimed at ending by 2030 the routine flaring of gas produced during the drilling of oil. At the time, Iraq flared the second largest quantity of gas in the world (after Russia) – some 17.37 billion cubic metres (bcm). To date, not much has changed in these figures. In practical terms, this has meant that Iraq has remained dependent on Iran for around 40 percent of its electricity supplies, provided both directly from Iran and through huge imports of gas by Iraq.
This has been a constant source of extreme tension between Iraq and the U.S., and has led to the ‘Baghdad Ballet’, as analysed in my new book on the new global oil market order. This was characterised by whoever was Iraqi prime minister at the time going to Washington every year to ask for money to bail out its perennially-beleaguered budget, in exchange for which he would ensure that Iraq would end its energy dependence on Iran. Washington would then send billions of dollars to Iraq, whereupon Iraq would continue to import exactly the same amount – or more – electricity and gas from Iran as ever. The fanciest moves in the Baghdad Ballet came from the ultra-smooth Mustafa al-Kadhimi. He had danced the usual dance with the U.S. so well that in May 2020 Washington gave him even more money than before and the longest waiver ever given – 120 days – to keep importing gas and electricity from Iran, on the usual proviso that Iraq stopped doing it soon. Once the money had been banked and al-Kadhimi was safely back on home territory, Iraq signed a two-year contract – the longest to date – with Iran to keep importing gas and electricity from it.
The U.S. has many fine qualities, but one of them is not tolerance when it is made to look stupid, so after the new gas and electricity supply deal had been signed between Iraq and Iran, the U.S. let the formidable State Department spokeswoman, Morgan Ortagus, out of her room, and she let fly. Not only was the next waiver to Iraq the shortest ever – 30 days – but also at the press conference in which it was announced, Ortagus also let it be known that the U.S. was hitting 20 Iran- and Iraq-based entities with swingeing new sanctions. She cited them as being instruments in the funnelling of money to Iran’s Islamic Revolutionary Guards Corps’ (IRGC) elite Quds Force, which was entirely true. She added that the 20 entities were continuing to exploit Iraq’s dependence on Iran as an electricity and gas source by smuggling Iranian petroleum through the Iraqi port of Umm Qasr and money…
Read More: Iraq’s Giant Halfaya Gas Project May Be Finished Ahead Of Time