Iraq struggles to catch up with power demand

15 December 2010

Demand for power in Iraq is roughly double installed generation capacity. Electricity Ministry’s capacity building plans rely on private sector

Iraq’s power demand dramatically outstrips the country’s generation capacity and the gap is growing. While the US has invested several billions of dollars into the reconstruction of the power sector, Iraq has seen few new power generation plans come to fruition.

There has been a marked improvement in plant efficiency as a result of the investment. But, besides an expansion of the Al-Qudas power project and rehabilitation of a power plant at Doura, the Electricity Ministry has not added much generation capacity. The story is different in Kurdistan, where the private sector has developed three power projects.

Iraq is struggling to catch up and has launched an ambitious capacity building programme, planned to an aggressive schedule. A fleet of new power plants, using turbines secured from megadeals signed with Germany’s Siemens and GE of the US, are planned. Several engineering, procurement and construction (EPC) contracts have been signed and more will follow. However, several contractors have complained that even after the EPC contracts are signed, funds are not always forthcoming.

A series of independent power projects have also been planned. While the projects offer a significant investment opportunity, many developers have been deterred by the lack of a gas feedstock agreement from the government and a tight deadline for proposals. Together with a lack of relevant legislation and regulatory frameworks, negotiating the road ahead will be tricky.

At the same time, several oil and gas majors are planning captive power plants using gas that is currently flared. However, industry sources have said that a lack of communication with the Electricity Ministry to offtake the power will undermine these plans.

Iraq has a huge challenge ahead and much is at stake. The Electricity Ministry has big plans but each rely on attracting and retaining private-sector support. It will need to work closely with the Oil Ministry to achieve this and ensure its plans are appealing and executed successfully.

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