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Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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Here’s Why Qatar Is About To Make A Big Move On Iraqi Oil & Gas

  • Ever since the invasion of Ukraine, the U.S. has cleverly sought to turn Russia’s own weaponization of its energy supplies – especially into Europe – against it.
  • Prior to the war in Ukraine, Washington’s intentions regarding Iraq were mixed.
  • Qatar’s move to buy a 30 percent stake in four US$27 billion projects in Iraq that were supposed to be run by TotalEnergies falls in line with Washington’s strategy for Iraq.

Prior to the unwitting boost that Russia’s ongoing failure in Ukraine has given the U.S., NATO, and Europe, Washington’s intentions regarding Iraq were mixed. On the one hand, the reasons why the U.S. invaded Iraq – to secure oil supplies that would lessen its reliance on Saudi Arabia, to control the centre ground in the Middle East, and to counteract Iran’s growing influence in Iraq and in the region – still stood. On the other, though, it had long been clear in Iraq, Afghanistan and indeed Saudi Arabia, among many others, that Islamic countries did not want an ongoing Western Christian presence in their countries. It may be that Qatar’s move to buy a 30 percent stake in four US$27 billion projects in Iraq that were set to be managed entirely by France’s TotalEnergies are in line with the U.S.’s new strategy for Baghdad.

The four projects are essential to Iraq’s future as a truly independent country. The first of them is the completion of the Common Seawater Supply Project (CSSP), which remains crucial in enabling Iraq to reach crude oil production targets of 7 million barrels per day (bpd), then 9 million bpd and perhaps even 12 million bpd, as analysed in depth in my last book on the global oil markets. The CSSP in its most basic iteration involves taking and treating seawater from the Persian Gulf and then transporting it via pipelines to oil production facilities to maintain pressure in oil reservoirs to optimise the longevity and output of fields. The long-delayed plan for the CSSP is that it will be used initially to supply around 6 million bpd of water to at least five southern Basra fields and one in Maysan Province, and then built out for use in other fields.

Related: Oil Prices Set To Climb On Rumors That The Fed Will Stop Hiking Interest Rates

The second of the projects is to collect and refine at a major processing plant the associated (with oil drilling) gas that is currently burned off at the five southern Iraq oilfields of West Qurna 2, Majnoon, Tuba, Luhais, and Artawi. Initial comments from Iraq’s Ministry of Oil highlighted that the plant is expected to produce 300 million cubic feet of gas per day (mcf/d) and double that after a second phase of development. Then-Iraqi Oil Minister, Ihsan Abdul Jabbar, also stated at the time the TotalEnergies deal was announced that the gas produced from this second project would also help Iraq to cut its gas imports from Iran, with the domestically produced gas being cheaper than the Iranian gas. Successfully capturing associated gas rather than flaring it would also allow Iraq to revive the also long-stalled US$11-billion Nebras petrochemicals project with Royal Dutch Shell. If Nebras went ahead it could be completed within five years and would generate estimated profits of up to US$100 billion for Iraq within its 35-year initial contract period.

The third part of TotalEnergies’ four-pronged US$27 billion deal is aimed at boosting crude oil output from Iraq’s Artawi oil field to 210,000 barrels per day (bpd) of crude oil, up from the current circa-85,000 bpd. This project could lead TotalEnergies (and eventually) others to engage in similar crude oil production boosting projects across the country. The French oil and gas giant already has a 22.5 percent stake in the Halfaya oil field in Missan province in the south and an 18 percent stake in the Sarsang exploration block in the semi-autonomous region of Kurdistan in the north. The last of the four projects to be undertaken by the French company will be the construction and operation of a 1,000-megawatt solar energy plant.

The most obvious fit for Qatar into this array of projects would be in the gas project, given its expertise in the field and its role as the world’s top liquefied natural gas (LNG) exporter. This is also the role that since Russia’s invasion of Ukraine in February 2022 has put it in the spotlight of the major Western powers as a substitute for lost Russian gas supplies. Qatar does not just have abundant volumes of gas, but it also has the ability in its LNG capabilities to move that gas more quickly and to more places than is possible for gas that is transported via pipelines. Currently Qatar has liquefaction capacity of around 77 million tonnes per year (mtpy), although it can and has produced more if required, and has plans to increase that to 126 mtpy by 2027. When the de facto leader of the European Union (EU) bloc, Germany, was wavering over whether to back the intended sanctions on Russian gas – gas constitutes around 27 percent of Germany’s energy mix and 55 percent of this came from Russia before the invasion of Ukraine – Qatar LNG supplies were used to plug a significant part of the short-term gap in supplies. The remainder was plugged by increased take up from Norway, the U.S., and the Netherlands. 

Crucially here, it was the U.S. that played a key role in brokering this short-term gas fix from Qatar for Germany. As highlighted at the time by OilPrice.com, December 2022 saw two early sales and purchase agreements signed between QatarEnergy and the U.S.’s ConocoPhillips to export LNG to Germany for at least 15 years from 2026. These deals will provide Germany with 2 million metric tonnes per annum (mtpa) of LNG, sent from Ras Laffan in Qatar to Germany’s northern LNG terminal of Brunsbuettel. An accompanying statement from QatarEnergy’s chief executive officer (also Qatar’s Energy Minister), Saad al-Kaabi – which sounded as though it could have been written by one of the high-level energy policy advisers in the White House – ran: “[The two sales and repurchase agreements] mark the first ever long-term LNG supply agreements to Germany, with a supply period that extends for at least 15 years, thus contributing to Germany’s long-term energy security.” The U.S.’s ConocoPhilips is involved as one of its subsidiaries will be the entity that purchases the LNG from Qatar that will then be delivered to Brunsbuettel, which is currently still under development.

Ever since the invasion of Ukraine, the U.S. has cleverly sought to turn Russia’s own weaponization of its energy supplies – especially into Europe – against it. After all, the logic runs, if Europe depended on gas and oil supplies from Russia to keep the wheels of its industry turning then conversely Russia depended on revenues from those supplies into Europe to keep its financing and economy running smoothly. Consequently, by cutting as many of those revenues off to Russia, over time its economy will be devastated, in a much more directly correlated way – and therefore, much more quickly – than had been in achieved through similar sanctions on Iran.

There is another very interesting element to the U.S.’s focus on Qatar as a prime ally in this element of its anti-Russia strategy: Washington has chosen it over and above Saudi Arabia, from which it has asked for, expected, and received no assistance at all in its attempts to punish Russia for its invasion on Ukraine. As analysed in great depth in my last book on the global oil markets, the longstanding agreement made on 14 February 1945 between then-U.S. President, Franklin D Roosevelt, and the then-Saudi King, Abdulaziz bin Abdul Rahman Al Saud, was this: ‘The U.S. would receive all of the oil supplies it needed for as long as Saudi Arabia had oil in place and, in return for this, the U.S. would guarantee the security both of the ruling House of Saud and, by extension, of Saudi Arabia.’ 

This deal ran smoothly until the 1973 Oil Crisis, after which the race was on as far as the U.S. was concerned to made itself independent of the whims of Middle Eastern countries – especially Saudi Arabia – for its energy needs. After the rise of the U.S. shale gas and oil sectors in the early 2010s especially, and the 2014-2016 Oil Price War instigated by Saudi Arabia to destroy or at least disable those sectors, the U.S. relationship with the Kingdom was finished in spirit. The final nails in the coffin of any residual goodwill left over from the original 1945 Agreement came in the form of Russia’s crucial support for OPEC’s oil production cut at the end of 2016, aimed at increasing oil prices to try to restore its members’ finances after the War. This turned into the ‘OPEC+’ grouping, with the ‘plus’ principally being Russia. Since then, as also analysed in depth in my last book on the global oil markets, Saudi Arabia has moved inexorably away from the U.S. and toward the Russia-China sphere of influence, failing to condone the Russian invasion of Ukraine and not deigning to take a telephone call from U.S. President Joe Biden to play a part in alleviating spiralling energy prices.

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By Simon Watkins for Oilprice.com

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  • Mamdouh Salameh on January 31 2023 said:
    The author is right in saying that US invasion of Iraq was about oil. I said it in my book:” Over a Barrel” published in 2004 and Alan Greenspan, the veteran governor of the US Federal Reserve for 17 years admitted it in his book: ”The Age of Turbulence” published in 2007.

    But the author is completely wrong in claiming that the objectives of the invasion were to secure oil supplies that would lessen its reliance on Saudi Arabia and counteract Iran’s growing influence in Iraq. By invading Iraq the United States was aiming to steal Iraq oil. It didn’t need to invade the county to get oil supplies from Iraq since the late Saddam Hussein was happy to sell oil to the United States. Moreover, Saudi Arabia was part and parcel of the invasion.

    Furthermore, Iran’s influence in Iraq has emerged in the aftermath of the United States losing the war in Iraq. While it won the military battles, it lost the war. The winners were China eventually emerging with the biggest investments in Iraq’s spectacular oil wealth and Iran who dominates the political scene in Iraq.

    Qatar’s move to buy a 30% stake in four $27 billion projects in Iraq that were set to be managed entirely by France’s TotalEnergies could be the best thing that could happen to Iraq’s oil and gas development. It could accelerate Iraq’s plans to reach crude oil production targets of 7 million barrels per day (mbd) and even 9 mbd eventually.

    Qatar’s great business acumen and astuteness have enabled it to transform itself from a tiny desert emirate into a global LNG giant that is the world’s largest producer and exporter of LNG. It is equally a medium size oil producer producing an estimated 1.0 mbd snd exporting 800,000 barrels a day (b/d) but its expertise in gas production that will particularly be of great help to Iraq.

    Qatar’s business-savvy approach to business is what Iraq badly needs at present. Such cooperation will be very beneficial for both countries.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • Mamdouh Salameh on January 31 2023 said:
    The author is right in saying that US invasion of Iraq was about oil. I said it in my book:” Over a Barrel” published in 2004 and Alan Greenspan, the veteran governor of the US Federal Reserve for 17 years admitted it in his book: ”The Age of Turbulence” published in 2007.

    But the author is completely wrong in claiming that the objectives of the invasion were to secure oil supplies that would lessen its reliance on Saudi Arabia and counteract Iran’s growing influence in Iraq. By invading Iraq the United States was aiming to steal Iraq oil. It didn’t need to invade the county to get oil supplies from Iraq since the late Saddam Hussein was happy to sell oil to the United States. Moreover, Saudi Arabia was part and parcel of the invasion.

    Furthermore, Iran’s influence in Iraq has emerged in the aftermath of the United States losing the war in Iraq. While it won the military battles, it lost the war. The winners were China eventually emerging with the biggest investments in Iraq’s spectacular oil wealth and Iran who dominates the political scene in Iraq.

    Qatar’s move to buy a 30% stake in four $27 billion projects in Iraq that were set to be managed entirely by France’s TotalEnergies could be the best thing that could happen to Iraq’s oil and gas development. It could accelerate Iraq’s plans to reach crude oil production targets of 7 million barrels per day (mbd) and even 9 mbd eventually.

    Qatar’s great business acumen and astuteness have enabled it to transform itself from a tiny desert emirate into a global LNG giant that is the world’s largest producer and exporter of LNG. It is equally a medium size oil producer producing an estimated 1.0 mbd snd exporting 800,000 barrels a day (b/d) but its expertise in gas production that will particularly be of great help to Iraq.

    Qatar’s business-savvy approach to business is what Iraq badly needs at present. Such cooperation will be very beneficial for both countries.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

Leave a comment




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