Cleary Gottlieb Steen & Hamilton advised the Iraqi oil ministry on a $ 27 billion energy project with TotalEnergies of France – the largest investment by a western company in Iraq, according to Cleary.
The aim of the project, some of which has been negotiated for ten years, is to increase Iraq’s power generation capacity in order to alleviate the country’s regular and acute power shortages in a more efficient and environmentally friendly way than the methods currently used.
The project consists of four interrelated contracts for:
- the construction and operation of a gas processing plant to treat excess natural gas produced from oil fields in southern Iraq and to deliver the gas to surrounding power plants for use in generating electricity;
- the construction of a seawater treatment plant and the financing of an associated transport network to transport the treated water to various oil fields in Iraq in order to use it for oil production instead of scarce water from other sources;
- Build, finance and operate a 1,000 MW solar power generation project to provide an alternative energy source; and
- the development and exploitation of the Ratawi oil field in southern Iraq, the income from which will help finance the project.
The gas treatment infrastructure, the seawater treatment plant and the solar power plant are financed by TotalEnergies, cost-covering and remunerated according to the project performance.
The Council of Ministers of the Republic of Iraq approved the project on July 27th and the agreements were signed on September 5th.
The Cleary team advising the Iraqi government consisted of Andrew Bernstein, a Paris-based partner who specializes in transactions for states and capital markets, and Jad Nasr, a shareholder / financial partner based in Abu Dhabi. TotalEnergies was represented by the company’s internal legal department.
Cleary is one of two US-based international companies – the other is Vinson & Elkins – to represent the Department of Oil.
The project is the first in a decade designed to extract and process associated gas from oil fields in Iraq, which would end the wasteful and polluting practice of flaring. This is a priority for the Iraqi government, Bernstein told Law.com International in an interview.
The complexity of the project results not only from the number of contracts, but also from their location: In Iraq, only one hundred percent state agencies are entitled to own and exploit oil and gas reserves.
“The contractual framework must be a service contract under Iraqi law, the structure Iraq has used in five licensing rounds over the past 12 years,” said Bernstein. “But these license rounds only concerned upstream oil or gas projects. They did not involve gas processing, solar energy, or water.
“We had to make sure that all four components of the project worked together,” he said. “If one were to experience delays, how would that affect the other?”
Bernstein recognized the professionalism and dedication of the Iraqi teams and TotalEnergies’ legal team as a “key factor” in bringing the deal home.
“TotalEnergies has worked hard to understand how things work in Iraq and the concerns of Iraqi partners,” he said. “A successful project really requires that from both sides.”