Iraq resurrects failed private power programme

24 September 2013

Deputy Prime Minister Hussain al-Shahristani says investors have been invited to build new plants

Iraq is planning to resurrect its previously cancelled independent power project (IPP) programme as it looks to tackle crippling electricity shortages, according to Hussain al-Shahristani, Iraq’s Deputy Prime Minister for Energy Affairs.

“Power has been one of our weakest areas. We plan to invite investors for power generation projects, to build new plants as IPPs. A decision has been taken at the highest levels of the government”, said Al-Shahristani speaking at the Gulf Intelligence Forum in Dubai on 24 September.

“The investors who showed interest in the past have been invited again. But any investor interested in producing electricity and selling it to the Ministry of Electricity, can come and see us”. Al-Shahristani leads a committee to push the IPP programme on, but would not divulge details on the time line, new terms on offer, or how many plants would be tendered.

Iraq originally launched a tender for a series of IPPs in 2010, but abandoned the plan in mid-2011 after receiving disappointing offers from investors. The four IPPs were to add a total of 2,750MW in electricity generation capacity. The developers were set to be awarded 25-year build-own-operate (BOO) contracts to develop the gas-fired plants, using Frame 9E gas turbines supplied by the US’ GE.

At the time Baghdad gave only a limited explanation for the scheme’s failure, saying the proposed prices were too low and bidders lacked experience. Developers however, pointed to Iraq’s refusal to guarantee gas feedstock for the plants, which meant fuel risks had to be borne by the developer. Al-Shahristani did not indicate if the government has addressed these concerns in the new programme.

Iraq has a current power capacity of around 6,150MW, well short of peak demand of 14,000MW. According to the newly released National Development Plan for 2013-2017, demand is expected to rise to nearly 20,000MW by 2017.

The Electricity Ministry plans to invest $22.5bn by then to add 22,000MW of new capacity by 2016 by building 40 new plants. However, currently one of the biggest obstacles to the power plant development is the provision of gas feedstock. “Current gas production is not sufficient in the short term. We have plants which will be completed and ready this year, but no gas for them,” says Al-Shahristani.

The immediate solution is to import gas from Iran. Baghdad and Tehran finalised a long awaited gas import contract in July, which will see Iraq receive approximately 850 million cubic feet a day (cf/d). The 225-kilometre pipeline, 48-inch gas pipeline will supply feedstock for three power stations, one in Diyala and two in Baghdad providing 2,500MW of electricity.

“We have one pipeline which will be ready by the end of the year, and another pipeline to Basra, which will be completed within six months. These will give us the breathing space while we increase our gas production,” says Al-Shahristani.

The Iranian gas deal covers imports for five years, although this could be extended.

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