TotalEnergies Launches Major Gas Processing Project in Iraq

French oil and gas company TotalEnergies (NYSE:TTE) has kicked off the construction of a new gas processing facility in Iraq, marking the first phase of a massive multi-energy project. The ArtawiGas25 facility will process 50 million cubic feet of gas per day sourced from the Ratawi field, which is enough to power 200,000 households in the Basra region. This initiative is seen as a key part of TotalEnergies' $27 billion energy project that will help shape Iraq's energy future.

In May, TotalEnergies reached an agreement with the Iraqi government to move forward with the project after years of delays. This came after a deal signed in 2021, which saw TotalEnergies commit to building four oil, gas, and renewable energy projects in southern Iraq over the next 25 years with an initial investment of $10 billion. However, internal political disagreements in Iraq had put the project on hold, causing uncertainty in the sector. With Iraq agreeing to a smaller 30% stake, TotalEnergies is now in a position to resume operations and potentially attract more foreign investment to the region.

The development is a sign of hope for Iraq's energy sector, which had faced a decline in foreign investment due to geopolitical instability and the retreat of major companies like Exxon Mobil (NYSE:XOM), Shell Plc. (NYSE:SHEL), and BP Plc. (NYSE:BP). Iraq has, however, enjoyed relative political stability in recent years, making it a more attractive destination for foreign investors once again.

In a statement, TotalEnergies CEO Patrick Pouyanne expressed his optimism about the project’s progress: “The government of Iraq confirmed the whole contract, no modification at all... so that was for me more than good news.”

While TotalEnergies' venture signals progress for Iraq, the country could also resume oil exports via a pipeline to the Turkish port of Ceyhan, which were halted in March 2023 due to a dispute over unauthorized exports. The meeting between Iraq’s oil ministry, Kurdistan’s Ministry of Natural Resources, and international oil companies in June has revived hopes for the resumption of these key export flows.

Meanwhile, the global oil market is witnessing notable shifts. With reduced supply from Russian and Iranian crude amid tightening Western sanctions, countries like China and India are increasing their purchases of oil from the Middle East and Africa. These developments have led to a surge in crude prices, with some Middle Eastern oil grades reaching rare premiums over the global Brent benchmark. This shift has prompted refiners in India to buy spot cargoes from Abu Dhabi and Oman, while Chinese buyers are turning to oil from Angola and Abu Dhabi.

As global demand for Middle Eastern oil grows due to the uncertainty surrounding Russian and Iranian supply, countries like China and India are positioning themselves to secure energy resources from other regions, further bolstering the importance of TotalEnergies' ongoing projects in Iraq.

The resumption of Iraqi oil exports and the success of TotalEnergies' gas processing facility could have far-reaching implications for the regional energy landscape and the global market.