Iraq seeks foreign investments to curb gas flaring, eyes US and European partnerships

Shafaq News/ Iraq is actively pursuing foreign investments to reduce its notorious gas flaring and enhance production, a top energy official said.

Hamid Younis Al-Zobaie, Iraq’s Deputy Minister of Oil, described the country as "one of the worst offenders" in gas flaring during a forum at the Atlantic Council in Washington, “Iraq, despite being the second-largest oil producer in OPEC, is one of the worst violators when it comes to gas flaring, a toxic and wasteful practice that releases usable gas into the atmosphere,” he said, according to S&P Global Commodity.

Al-Zobaie highlighted that Iraq is committed to attracting foreign companies, particularly from the US and Europe, to invest in its energy sector. "The Ministry of Oil is working to encourage foreign firms to operate in Iraq, and the current government is focused on investment and cooperation with global companies," he added.

With a goal of achieving self-sufficiency in gas within five years, Iraq has ramped up efforts to draw in international investments. The United States has encouraged its companies to enter the Iraqi energy market, with high-level Iraqi delegations visiting the US twice this year, resulting in several new deals.

Al-Zobaie confirmed that US and European firms have been authorized to collaborate with Iraq, and the US government is formulating plans to cooperate with local Iraqi companies.

Iraq’s drive for foreign investments is also seen as part of broader US efforts to counter growing Chinese influence in Iraq's energy sector and reduce Baghdad's reliance on electricity imports from Iran. Iraq suffers from chronic power outages and is heavily dependent on Iranian electricity imports, while the US is pushing to develop gas projects to lessen this dependence. However, concerns over security and corruption have made U.S. firms hesitant to invest.

As major Western oil companies retreat from Iraq’s energy sector, the country has increasingly turned to China. In 2023, Chinese firm PetroChina took over operations at the West Qurna 1 oil field after ExxonMobil exited, selling its 22.7% stake to Iraq’s state-owned Basra Oil Company.

A World Bank report in June 2023 noted that Iraq increased oil production that year but managed to reduce gas flaring by only 1%. Seven deals were signed with U.S. companies in April to tackle associated gas and flaring, marking progress in curbing the practice.

China's dominance in Iraq's oil sector has grown as Western firms have scaled back. In Iraq’s latest licensing round in May, Chinese companies won 10 out of 13 oil and gas projects. Smaller Chinese firms also participated, further solidifying China’s foothold in Iraq’s energy sector. China, already the largest buyer of Iraqi crude, imported 33.42% of Iraq's crude oil in the first nine months of 2024.

John Calabrese, an associate professor, noted that Chinese companies have long been enthusiastic participants in Iraq’s oil sector, while Western firms have been more hesitant. "Chinese companies have established a lasting presence over a long period, giving them a competitive advantage," Calabrese said.