UPDATE: Iraq approves compromise on TotalEnergies mega-deal

The Iraqi Cabinet cleared a major hurdle toward implementing a $27 billion energy deal with TotalEnergies, deciding on Tuesday to approve a 30 percent state participation in the project, according to a Cabinet statement.

If it moves forward, the project could be foundational to Iraq's plans for increasing production of oil, gas, and electricity — providing infrastructure to supply water needed to boost output at the largest oil fields in Basra; a processing plant needed to capture valuable associated gas that is otherwise being wastefully flared from several oil fields; and a solar power plant.

The deal seemed to be falling apart in late January when the Iraqi side revived an old demand that the state should increase its stake in the project from 25 percent to 40 percent, prompting TotalEnergies CEO Patrick Pouyanné to order a partial withdrawal of company staff from Iraq in early February before reversing his decision to give space for negotiations.

Multiple people familiar with the talks said the level of state participation was the only major sticking point. The French company has not yet publicly confirmed whether it has accepted a compromise of 30 percent, and if so, when the two sides will sign a binding agreement that leads to implementation.

The recent momentum seems promising, though. One senior Iraqi oil official said the two sides had met Sunday, characterizing it as "a good meeting" that teed up the project to be put on this week's Cabinet agenda.