Iraq in talks with Aramco for gas deal; to ink multi-billion dollar contracts with Saudi Arabia: report

Iraq is in talks with Saudi Aramco for a gas deal and plans to sign billions of dollars worth of energy, power, water and petrochemical contracts with Saudi Arabia, the country's oil minister told a state-owned newspaper, as OPEC's second-biggest producer seeks to woo more foreign investments.

Iraq is negotiating with Aramco to become a partner in exploration contracts of gas in the Western Desert, Ihsan Ismaael told Assabah newspaper Nov. 1. The talks are for drafting long-term contracts and currently, experts from both countries are studying the details, he said.

Aramco wasn't immediately available to comment on the report.

Iraq is also intensifying talks with Saudi Arabia's ACWA Power to build water desalination, clean energy and solar power plants in the country, the minister added.

The Iraqi government plans to ink the contracts before the end of its tenure, he said. Parliamentary elections held on Oct. 10 will be followed by a new government formation.

Iraq's oil ministry has started a dialogue with "a global energy company" to conduct gas exploration in the Western Desert in Anbar province, the ministry said in an Oct. 5 statement, amid plans to wean itself off Iranian energy imports.

Ismaael said in the statement he would name the company once an agreement is reached.

The ministry has also started 2D and 3D exploration work in Anbar and the northern province of Nineveh, Ismaael added.

Sanctions waiver

Iraq is under increasing pressure from the US to wean itself off electricity and gas imports from Iran, which has been subject to US sanctions since 2018.

The US administration has been granting Iraq waivers since 2018 to continue importing Iranian energy.

Intermittent supply of gas and electricity from Iran has led to widespread power shortages in Iraq this summer, when temperatures have soared to 50 C, especially in the south.

Adding to Iran's outage is the difficulty Iraq is facing in paying billions of dollars of dues to sanctions-hit Tehran, complicating Baghdad's ability to settle its arrears without the threat of financial repercussions.

Iraq has been seeking the help of international oil companies to capture associated gas. The majority of Iraq's gas output is pumped with oil and the associated gas is mostly flared. Iraq was the world's second-worst flaring nation after Russia in 2020, according to the World Bank.

IOC help

Iraq's state-owned South Gas Co. and Baker Hughes plan to develop a 200 MMcf/d gas recovery project in the south following a three-year delay, Ismaael said Sept. 19.

The project will process associated gas from Nasiriyah and al-Gharraf fields in the southern province of Dhi Qar.

The country also signed $27 billion worth of projects with TotalEnergies, including a $2 billion gas-gathering project.

The Ar-Ratawi gas-gathering network and treatment units will have a capacity to capture 600 MMcf/d of flared gas. The project will also produce 12,000 b/d of condensate and 3,000 mt/d of LPG to be used in the domestic market.

The gas project will help lessen reliance on Iranian imports as well as reduce the burning of liquid fuels for power generation, which amounts to 200,000 b/d, Ismaael said at a press conference Sept. 5. Currently, Iraq pays Iran $8/MMBtu for gas, while the Ar-Ratawi project will deliver gas at a cost of $1.50-$2/MMBtu, the minister added at the time.