Chevron Signs Agreement to Develop Iraq’s Nasiriyah Oil Field

U.S. oil and gas giant Chevron has reached an agreement in principle with Iraq’s Oil Ministry to develop the significant Nasiriyah oil field along with additional oil-producing fields and exploration sites. This agreement marks a notable return for Chevron, following a period of withdrawal by major Western firms from Iraq that commenced approximately seven years ago with ExxonMobil‘s exit from the critical Common Seawater Supply Project (CSSP).

Chevron’s move aligns with a trend of renewed interest from top-tier Western energy companies in Iraq. In recent weeks, several firms, including TotalEnergies and BP, have secured substantial energy deals, indicating a shift in the landscape of Iraq’s oil sector. TotalEnergies, for instance, has entered a US$27 billion deal, while BP has committed to a US$25 billion five-oilfield agreement.

The timing of this resurgence raises questions about what has changed since the mass exit of these companies. Iraq’s oil and gas potential remains unchanged, as does its geopolitical significance. The key factor influencing this renewed interest appears to be assurances from Iraqi authorities regarding improved transparency and governance.

According to senior energy and legal sources, ExxonMobil previously withdrew from the CSSP due to reputational risks associated with ongoing business in Iraq. The organization Transparency International highlighted Iraq’s struggles with corruption, noting it ranks among the worst globally for governance indicators. Issues such as massive embezzlement, procurement fraud, and bureaucratic bribery have historically undermined investor confidence.

The complexities surrounding Iraq’s oil sector are evident in ExxonMobil’s earlier attempts to negotiate continued engagement. The company sought assurances related to “cohesion,” “security,” and “streamlining” in its projects. Cohesion involved ensuring that project facilities were completed efficiently; security encompassed both the safety of personnel and the integrity of legal practices; and streamlining aimed to maintain project continuity despite changes in the Iraqi government.

A senior legal source emphasized that any future agreements involving major U.S. firms will require comprehensive evaluations by U.S. legal and accounting representatives, along with ongoing monitoring by U.S. security organizations. This stringent oversight is expected to apply to both Chevron and ExxonMobil.

Chevron’s prior experience in Iraq serves as a cautionary tale. In 2021, the company faced challenges in negotiations with the now-defunct Iraqi National Oil Company (INOC) over the same Nasiriyah project, which has been in development discussions since it was first discovered in 1975. The project aims to significantly boost output, with initial plans to raise production to at least 50,000 barrels per day.

Attempts to revive the Nasiriyah project have been met with various hurdles. In 2014, the Iraqi government sought to attract investment through revised technical service contracts, allowing investors a share in revenues once production commenced. Despite these adjustments, concerns about transparency and governance led to further delays in the project.

In the years since, Iraq has grappled with the complexities of international partnerships. China’s engagement in Iraqi oil projects, including proposals from Sinopec and PetroChina, showcased the difficulties of balancing investment demands and local capacities. Iraq’s experience with these negotiations has likely informed its current approach to foreign investment, particularly as it seeks to improve its international standing.

As Chevron embarks on this renewed venture, the focus remains on whether the assurances of transparency and improved governance will translate into sustained and successful operations in Iraq’s oil sector. The outcome of this agreement may set a precedent for future investments and the overall direction of Iraq’s energy landscape.