Iraq Oil Minister Says Gas Sector a Priority

Iraq’s oil sector is rebounding after a catastrophic year triggered by the coronavirus pandemic, with key investment projects on the horizon, Iraq’s oil minister said Friday. But he also warned that an enduring bureaucratic culture of fear threatens to stand in the way.

Iraq is currently trading oil at $68 per barrel, close to the approximately $76 needed for the state to operate without reliance on the central bank to meet government expenditures.

Oil Minister Ihsan Abdul-Jabbar Ismail took over the unenviable job of supervising Iraq’s most vital industry at the height of an oil price crash that slashed oil revenues by more than half last year. Since then, he has had to balance domestic demands for more revenue to fund state coffers and pressure from OPEC to keep exports low to stabilize the global oil market.

With the sector rebounding, Ismail told The Associated Press, he can now focus on other priorities. In the interview, he offered a rare glimpse into the inner-workings of the country’s most significant ministry — Iraq’s oil industry is responsible for 90 percent of state revenues.

He recounted how cutthroat Iraqi politics and corruption fears have often derailed critical investment projects during his tenure and those of his predecessors — a source of long-term frustration for international companies working in Iraq.

“In the Ministry of Oil, the big mistake, the big challenge are the delays in decision-making or no decision-making at all,” he said, attributing indecisiveness to fears of political reprisal from groups or powerful lawmakers whose interests are not served.

He described a warped work culture where allegations of corruption are used as tools by political players to get their way — and the mere possibility is often enough to keep high-ranking officials in ministry from signing off on important projects.

“This is the culture: To stay away from any case, to stay away from inspectors, to say ‘let us not do it’” he added. “I think this is the corruption that slows the economy.”

Still, during his time as minister he has sought to fast-track projects, he said.

Top on his list is developing the country’s gas sector, a central condition for Iraq to be eligible for US sanction waivers enabling energy imports from neighboring Iran. To that end, Iraq is looking to develop long-neglected gas fields and capture gas flared from oil sites.

Ismail said he is hopeful contracts will be signed within the coming months to develop key projects that could boost Iraq’s gas capacity by 3 billion cubic standard feet by 2025. But that all depends on closing the deal with oil companies; lucrative contract negotiations in Iraq have a history of stalling once commercial terms are laid out.

Iraq currently imports 2 billion standard cubic feet to meet domestic needs.

The ministry is close to signing with China’s Sinopec to develop Mansuriya gas field in Diyala province, said Ismail. The field could add 300 million standard cubic feet of gas to domestic production. He hopes to finalize the deal by mid-July.

The ministry is also in talks with France’s Total to develop an ambitious multi-billion dollar mega investment project in southern Iraq, including the Ratawi gas hub, development of Ratawi oil field and a scheme to provide water to oil fields required to boost production.

Early talks are also ongoing to develop Akkas gas field, in Anbar province, with the American Schlumberger and Saudi Arabia’s oil giant Aramco, he said, expressing hopes for an agreement there too.

Though negotiations with international companies have picked up speed, Ismail said entrenched indecision within his ministry persists. Investors have blamed glacial bureaucracy and indecision within ministry ranks for thwarting projects.

Among his deepest regrets is the collapse in talks — after five years of negotiations — between the ministry and Exxon-Mobil over a multi-billion dollar investment project that would have been key to increase Iraq’s production and exports.

“For me it was a big mistake from our side,” said Ismail, who was the former director-general of the state-owned Basra Oil Company.

Ismail himself came under scrutiny when lawmakers accused him of corruption. Cabinet dismissed him as head of the Basra company in October 2019 during a purge against alleged corruption. He was reinstated a few months later.

Iraqi media are often used as a pressure tool, Ismail said

“Someone sends me a contract, and it would be illegal to say yes, so I say no, and he starts to say bad things in the media,” Ismail said.

Also, he said 80 percent of his time is spent fielding requests from political parties and individuals asking for employment, contracts or job transfers — requests he says he routinely rejects.

“They say: ‘Move this person from this position to this, we need this position, we need this department, we need this company’,” he recalled.

OPEC Secretary General Haitham Al Ghais said on Monday that those that talk of critical minerals delivering the world a future of only renewables and EVs, are not providing a full picture.

In an article published on the organization’s official website, Al Ghais spoke about the many future energy pathways for nations and peoples across the world, affirming that “we all need to be realistic about how these can be achieved.”

Al Ghais said that sustainable energy pathways are vital for populations all over the world. However, he noted, “we need to appreciate the real-world impacts of scenarios and policies aimed at ramping up renewables and electric vehicles (EVs). There are many elements that filter into this, a central one being the role played by critical minerals.”

At this point, he mentioned the International Energy Agency (IEA), which says that in its Net Zero Emissions (NZE) by 2050 Scenario, demand for critical minerals quadruples by 2040.

“It is a pace never seen before in history,” Al Ghais wrote.

He noted that while these minerals, such as copper, cobalt, silicon, nickel, lithium, graphite and rare earths underpin the development of renewables and EVs, OPEC Member Countries are investing heavily in renewables, in all stages of their supply chains, and participating in the development of EVs.

OPEC attaches an importance “to the role of renewables and electrification in our energy future,” he said.

Al Ghais then posed several questions on the nature of such an expansion of critical mineral requirements.

“Is this kind of expansion truly feasible? What are the implications? How sustainable is it? And how important is oil and gas to the expansion of critical minerals, as well as renewables, EVs and grids,” he asked.

In the mentioned IEA scenario, Al Ghais said that by 2040, copper demand rises by 50%, rare earths demand almost doubles, cobalt demand more than doubles, and nickel demand is close to tripling.

“These are nowhere near the largest increases either. Graphite demand grows almost four times, and lithium sees a nearly ninefold expansion by 2040, underlining its crucial role in batteries,” he noted.

The OPEC Secretary General affirmed that this will require the construction of a huge number of new mines.

“Back in 2022, the IEA said that by 2030 alone, the world would need to build 50 new lithium mines, 60 new nickel mines and 17 cobalt mines,” he said.

He added, “It should be borne in mind that, historically, critical supply chain projects, such as for these types of commodities, have had long development lead times, from discovery to first production.”

Here, Al Ghais asked another question: is such growth realistic? And what might the impact be if growth comes up short, and equally importantly, what if policymakers have also followed a path of no longer investing in new oil and gas projects?

The Secretary General said EVs, wind turbines, solar panels, as well as new grids, are all hungry for critical minerals.

“An EV contains approximately 200 kg of minerals,” he explained. “For contrast, a conventional car uses around 34 kg. One megawatt of electricity produced by an offshore wind turbine requires around 15 tons of minerals, while the figure for solar is around seven tons. For natural gas, it is just over 1 ton.”

Iraq Oil Minister Says Gas Sector a Priority