LONDON: A US$27bil (RM113.22bil) deal between France’s Total and Iraq, that Baghdad hoped would reverse the exit of oil majors from the country, has stalled amid disputes over terms and risks being scrapped by the country’s new government.

       Iraq has struggled to attract major fresh investments into its energy industry since signing a flurry of post US-invasion deals over a decade ago.

       The Iraqi government has cut oil output targets repeatedly as international oil companies that signed those initial deals leave due to poor returns from revenue sharing agreements.

       Total agreed last year to invest in four oil, gas and renewables projects in the southern Basra region over 25 years. The deal, signed by Iraq’s oil ministry in September 2021 followed a visit from French President Emmanuel Macron.

       The ministry, however, did not have agreement on the deal’s financial details with all the government departments that needed to approve it, three Iraqi oil ministry and industry sources told Reuters, and it has been mired in disputes ever since.

       Following a parliamentary election, the deal now needs approval from a new Iraqi cabinet, including new oil and finance ministers, who won’t be in place until at least the end of March.

       Iraq’s oil ministry told Reuters it expects the TotalEnergies deal to complete from then.

       TotalEnergies said it was progressing towards closing the deal but added: “The agreements remain subject to conditions to be met and lifted by both sides.”

       The terms, which have not been made public or previously reported, have raised concerns from Iraqi politicians.

       A group of Shi’ite lawmakers wrote to the oil ministry in January demanding details of the deal and asking why it was signed without competition and transparency, according to a copy of the letter seen by Reuters.

       Parliament could force the oil ministry to review or scrap the deal.

       Under the draft terms, Total is relying on getting US$10bil (RM41.93bil) of initial investment to fund the wider project via oil sales from the Ratawi oilfield, one of four projects in the broader agreement, according to the sources.

       The Ratawi field is already pumping 85,000 barrels of oil per day and rather than Total receiving its share, the revenue is going into government coffers.

       Total is due to get 40% of the revenues from Ratawi’s oil sales, Iraqi oil sources involved in negotiations told Reuters.

       That dwarfs the more usual 10% to 15% that investors would have received from past projects through Iraq’s technical service contracts, which reimbursed foreign companies for capital and production costs and paid a fixed remuneration fee in crude.

       The higher the revenue-sharing proportion, the quicker and less risky the payback for investor.

       Iraq’s oil ministry officials argue the country needs to be competitive with other energy producing countries to lure big investors like Total.

       “We need to offer more incentives,” a senior oil ministry official said.

       Total also has concerns about the deal. The French company has rejected having Iraq’s National Oil Company (INOC) as its partner in the project, which is also delaying closing the deal, according to the two sources.

       INOC is Iraq’s reconstituted national oil firm, created to emulate firms such as the huge Saudi Aramco, but its legal status has yet to be fully cleared by Iraq’s new government and parliament, presenting a risk for Total. — Reuters