Aramco Eyes Major Opportunity In Iraq
Following the recent China-brokered resumption of relationship deal between historical enemies Saudi Arabia and Iran, a deal for the Kingdom to develop two key projects in Iran’s close ally Iraq is in the offing. The problem with this idea is that it is dependent on two highly unpredictable elements. The first is the degree to which senior Iraq Oil Ministry officials are willing to put the interests of their country ahead of their own. The second is the U.S.’s on the whole thing.
The deal – which was announced as definite and then as subject to further ratification – comprises one big idea and two smaller ones that support it. The big idea is for Iraq to take the next step in genuinely building out its gas sector. The other two ideas are first that towards this end, Saudi Aramco develops the giant Akkas gas field, and second that the resultant gas goes towards the build-out of the long-delayed Nebras Petrochemical Project, all of which are analysed in my new book on the new global oil market order.
To briefly recap some of the salient points here: official estimates are that Iraq’s proven reserves of conventional natural gas amount to 3.5 trillion cubic metres (tcm) or about 1.5 per cent of the world total, placing Iraq 12th among global reserve-holders. However, around three-quarters of Iraq’s overall proven reserves consist of associated gas – a by-product of oilfield development. The International Energy Agency estimates that ultimately recoverable resources will be much larger than the official estimates – with its estimate being 8.0 tcm.
Over the years, instead of capturing this hugely valuable associated gas resource to be used to generate much-needed domestic power, or to sell it off to generate much-needed income, Iraq has just burnt it off for nothing. After Russia, Iraq flares the largest quantity of gas in the world, with some 17 billion cubic metres burnt in 2022, according to a World Bank study.
The squandering of this associated gas resource has meant that Iraq is still reliant on Iran for around 40 per cent of all its power needs (through electricity and gas imports), which has long infuriated the Americans, who want Iraq to downscale its ties with Iran, as also analysed in my new book on the new global oil market order. It has also meant that every year Iraq runs into enormous budgetary problems (which it always expects the U.S. to bail it out of), and long periods of blackouts, particularly in the summer months.
Having signed up for the United Nations and World Bank’s ‘Zero Routine Flaring’ initiative aimed at ending this type of routine flaring by 2030, Iraq has announced the same plan three times, each to little effect. The most recent notable reiteration of the plan involved the U.S.’s Baker
Hughes harnesses 200 million cubic feet per day (mmcf/d) from the Gharraf oil field (and neighbouring ThiQar site, Nassiriya), plus other oil fields north of Basra. According to the Oil Ministry in 2020, all this output would go to the domestic power generation sector, with Baker Hughes stating that addressing the flared gas from these two fields would allow for the provision of 400 megawatts of power to the Iraqi grid. According to an accompanying statement from then-Oil Minister, Jabbar Al-Luaibi, Iraq was also negotiating a similar gas capture deal for the state-run Nahr Bin Umar field with Houston-based Orion Gas Processors.
Additionally, according to comments from Iraq’s South Oil Company, gas-processing facilities were to be constructed in the Missan and Halfaya fields that would have a combined capacity of 600 mmcf/d of gas when completed. The construction of gas-processing facilities in the West Qurna, Majnoon and Badra fields was also to have moved ahead, with respective overall capacities of 1,650 mmcf/d, 725 mmcf/d and 85 mmcf/d.
Early 2023 saw a restatement by France’s TotalEnergies of its commitment to move ahead with a four-pronged US$27 billion deal, one key project of which is to collect and refine associated natural gas currently burned off at the five southern Iraq oilfields of West Qurna 2, Majnoon, Tuba, Luhais, and Artawi. The development of the Akkas field by Saudi Aramco would be toward the same end of boosting Iraq’s indigenous gas supplies, and the Saudi firm has the capability to do it.
