London ( Business)TotalEnergies is investing in oil, gas and solar energy projects worth $27 billion in Iraq, returning to the country where the French company made its first energy discovery nearly a century ago.
This time, however, no new exploration is planned despite Iraq’s vast oil reserves, reflecting a shift by some major oil companies towards cleaner energy sources as the planet battles rising greenhouse gas emissions.
Instead, TotalEnergies will invest in a solar energy plant and projects to improve output from existing oil and gas fields in the country, OPEC’s second largest oil producer.
In a statement on Monday, TotalEnergies said an initial $10 billion investment would go toward a range of projects, including one to recover flared gas on three oilfields in order to supply local power stations. Gas flaring occurs during oil production, generating harmful greenhouse gas emissions and wasting the gas.
A second project involves injecting seawater into oil fields to optimize production while conserving scarce water supplies, and a third entails the construction of a solar power plant to supply Iraq’s Basra regional grid.
“These agreements signal our return through the front door to Iraq, the country where our company was born in 1924,” said TotalEnergies CEO Patrick Pouyanné. “Our ambition is to assist Iraq in building a more sustainable future by developing access to electricity for its people through a more sustainable use of the country’s natural resources,” he added.
Total renamed itself TotalEnergies earlier this year to symbolize the company’s push into renewable energies. In January, it became the first major oil company to quit the American Petroleum Institute, a powerful oil lobby group, over its position on the climate crisis.
Its investments in Iraq do not represent a total departure from oil, however. The Paris-based company is aiming to increase oil production at one oil field from 85,000 barrels per day to 210,000 barrels per day, according to a statement from Iraq’s prime minister Mustafa Al-Kadhimi.
Taken together, Total is committing $27 billion to the projects in capital investment and running costs over 25 years.
Pouyanné said the projects demonstrated TotalEnergies’ ambition to support oil producing countries in their energy transition by combining the production of natural gas and solar energy to meet the growing demand for electricity.
“It also demonstrates how TotalEnergies can leverage its unique position in the Middle East, a region where the lowest-cost hydrocarbons are produced, to gain access to large-scale renewable projects,” he added.
The collapse in oil prices caused by the Covid-19 pandemic slammed Iraq’s economy — which depends on oil for 90% of government revenues — causing GDP to contract by 11%, according to the International Monetary Fund. That has increased poverty rates and fueled social unrest.
In an opinion piece published by The Guardian newspaper last week, Iraq’s Finance Minister Ali Allawi joined Fatih Birol, executive director of the International Energy Agency, in calling for the world to produce less coal, oil and gas. But the energy transition had to include support for fossil-fuel producing countries to avoid undermining the stability of global energy markets.
“If oil revenues start to decline before producer countries have successfully diversified their economies, livelihoods will be lost and poverty rates will increase,” they said.