Recent developments in Iraq’s oil and gas sector highlight ongoing shifts in the country’s energy landscape, marked by significant announcements that could influence both regional and global dynamics.
In recent days, Iraq’s Oil Ministry awarded 13 new contracts for oil fields and exploration blocks. Most of these contracts went to Chinese companies, reinforcing China’s growing influence in Iraq’s energy sector. The new projects are expected to add 750,000 barrels per day (bpd) of oil and 850 million cubic feet per day (MMcf/d) of gas to Iraq’s output. This move aligns with China’s broader strategy to secure major assets and shape Iraq’s political and economic future, as detailed in recent analyses.
Conversely, the U.S. and its allies have attempted to counterbalance China’s influence by securing their own deals in Iraq. Notably, France’s TotalEnergies has pursued a $27 billion multi-faceted deal, which includes significant oil and gas projects. A surprising development is the recent announcement that China Energy Engineering Corporation (CEEC) will collaborate with TotalEnergies on a 1-gigawatt solar power project at the Artawi field in Basra, a key component of TotalEnergies’ larger deal.
Chinese firms have been prominent in the latest contract awards. China National Offshore Oil Corporation (CNOOC) secured Block 7, while ZPEC won contracts for the East Baghdad and Middle Furat oil fields, among others. Additionally, Sinopec, Anton Oil, and UEG also received contracts. Prior to these recent awards, Chinese companies already managed over a third of Iraq’s proven oil and gas reserves and two-thirds of its production. This dominance reflects Beijing’s strategy post-2021, following the end of the U.S. combat mission in Iraq.
China’s Zhenhua Oil signed a $2 billion prepayment deal with the Federal Government of Iraq (FGI) around the same time, mirroring a similar agreement Russia made in the Kurdistan Region of Iraq (KRI). The 2021 ‘Iraq-China Framework Agreement’ expanded China’s influence, offering preferential treatment for Chinese firms and discounted Iraqi oil and gas. This agreement also facilitated infrastructure projects, such as the construction of a civilian airport in Dhi Qar governorate, which could be expanded for dual civilian and military use.
China’s broader strategy includes linking Iraq’s $17 billion Strategic Development Road (SDR) to its Belt and Road Initiative (BRI), facilitating trade between China and Europe and connecting with Iran’s Land Bridge and Russia-Iran Energy Corridor.
The $27 billion TotalEnergies deal, which includes the Common Seawater Supply Project (CSSP), was a significant development. This project, delayed for over a decade due to competition between ExxonMobil and CNPC, involves treating seawater from the Persian Gulf to enhance oil production. TotalEnergies is also set to refine associated gas at several southern Iraq oilfields, reducing Iraq’s reliance on Iranian energy imports and potentially impacting regional power dynamics.
TotalEnergies’ experience in Iraq, including stakes in the Halfaya oil field and the Sarsang exploration block, positions it to boost output from the Artawi oilfield and construct a 1-gigawatt solar energy plant.
The cooperation between Chinese and French firms in Iraq may signal a strategic shift, reflecting a new approach where the West and China collaborate in Iraq, at least while it serves their interests. This change in strategy follows a recent preliminary agreement by BP to develop oil fields in Kirkuk, highlighting a broader reevaluation of West-East relations in the region.
As noted by a senior EU energy security source, adapting to these new dynamics is crucial for the West, marking a shift from previous antagonistic strategies in Iraq.