Rich oil deposits can be a blessing or a curse for a country.
Norway, for instance, has an oil fund that is the envy of the world, now invested in diverse income-generating equities and used to “help finance the Norwegian welfare state for future generations.”
Then you have places like Venezuela, a petrostate in decline, where corruption, concentration of power, and undiversified dependence on fossil fuel income has stymied progress for generations.
Nowhere is the dark historical baggage of oil reserves more pronounced than in Iraq.
Iraq is OPEC’s second largest oil producer, and Iraq’s oil played a leading role in the wars that have savaged the country for decades. But a huge new investment from a leading energy company might foreshadow big changes to the conventional wisdom in Iraq’s energy sector.
Nearly a hundred years ago, French company TotalEnergies made its first oil discovery in what is now Iraq. This week, TotalEnergies announced a major new investment in Iraq totaling $27 billion. In many ways, this investment is a return to the TotalEnergies legacy in Iraq. However, given that this is an investment from what has been mostly a major oil and gas company, this commitment comes with an interesting twist.
Although much of the investment is indeed going to fund oil and gas projects, none of it is funding new exploration. Instead, projects will enhance output from Iraq’s existing oil and gas fields. A portion of the first $10 billion, for example, is earmarked to recover flared gas on three existing oilfields, which will reduce waste, lower greenhouse gas emissions, and supply local power stations. Another project allowed for by the new funding involves pumping seawater into existing oilfields to increase production without impacting notoriously scarce local freshwater resources.
Getting more out of existing facilities is certainly an admirable exercise in efficiency. Yet, the real surprise for a company that has been traditionally associated with oil and gas is another part of the investment: constructing a major solar power plant.
The solar plant will supply Iraq’s Basra regional grid. It will have a 1-gigawatt capacity. (If you know your “Back to the Future” trivia, that’s just about enough to power Doc Brown’s DeLorean time machine. Or, you know, the equivalent energy of 110 million LED bulbs. Or, if you’d prefer, the energy of about 1.3 million horses.)
“Our ambition is to assist Iraq in building a more sustainable future by developing access to electricity for its people through a more sustainable use of the country’s natural resources,” Patrick Pouyanné, TotalEnergies’ Chairman and CEO, said in a press release.
The solar portion of TotalEnergies’ new Iraq development is relatively modest. By way of comparison, its first phase of the flared gas recovery portion of the project is set to supply 1.5 times the power generation of the solar project, and it will supply three times as much in its second phase. Still, a solar project of this size represents a significant investment, and it is a real departure from the status quo in a country still known for oil and gas.
It’s probably no coincidence that TotalEnergies’ push into solar power in Iraq comes at a time when almost everyone supports expanding solar energy production. Even so, the scope of the investment, particularly in a place in the world that has long been recognized for fossil fuel-based energy production, shows that this is not just a well-timed public relations gimmick.
In the future, more energy companies are likely to follow TotalEnergies’ example. And that’s not just good news for the planet: Energy companies that wish to follow more in the path of Norway than Venezuela are going to find that diversification is in their own best interests in the coming years. Sometimes good business and corporate responsibility align, and solar energy expansion in Iraq is one way of demonstrating how.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at firstname.lastname@example.org.