French energy giant TotalEnergies announced Wednesday an agreement with Iraq on a long-delayed $10 billion project to improve the country's rundown electricity grid after resolving disputes over the terms of the deal.
The contract – which includes investments in oil, gas and solar production – was signed in September 2021, a new government took office in Iraq last year, and its demands did not please TotalEnergies.
Baghdad sought a 40% stake in the Gas Growth Integrated Project (GGIP), but Iraqi officials said in February that TotalEnergies wanted Iraq to have a smaller stake.
Iraq's cabinet said in a statement late Tuesday that it had accepted to reduce its demands to 30% "because of the importance of resolving the issue."
TotalEnergies confirmed Wednesday that Iraq's Basra Oil Company would get the 30% stake while a Qatari firm – QatarEnergy – will get 25%, and the French firm will own 45%.
"TotalEnergies welcomes the continuity of the voice of the State of Iraq on this Development & Production Contract, which is a strong and positive signal for foreign investment in the country," the company said.
The agreement follows four rounds of talks in recent months between TotalEnergies chief executive Patrick Pouyanne and Iraqi Prime Minister Mohammed Shia al-Sudani, the company said.
Pouyanne was in Baghdad this past weekend at Sudani's invitation, TotalEnergies said.
Sudani had traveled to Paris in January for energy and security talks with President Emmanuel Macron.
Pouyanne had warned last month that he "will not embark the company in such a project if we have to renegotiate all the terms."
He said Iraq was "not the easiest place to invest," and TotalEnergies are aware of the risks of doing business there, but respecting the terms of the contract was "fundamental" to him.
Biggest Western investment
Despite being home to a wealth of hydrocarbon reserves, Iraq's neglected electricity grid is dilapidated and a victim of rampant corruption, with power cuts lasting for hours.
Neighboring Iran supplies a third of Iraq's gas and electricity, and Baghdad is seeking greater energy independence.
The $10 billion Gas Growth Integrated Project includes recovering flared gas from oil fields to power electricity-generation plants.
A one-gigawatt solar power plant will be built to supply electricity to the Basra regional grid, with Saudi firm ACWA Power joining the project, TotalEnergies said.
The French firm said that the GGIP also includes the construction of a seawater treatment plant to provide water used in oil production – an alternative to using fresh water from rivers and aquifers.
When the deal was signed in 2021, Iraqi officials said it would lead to a second round of investments of $17 billion, making it the most significant investment by a Western company.