Despite its enormous oil and gas reserves, Iraq lacks the oil transport infrastructure to get its product to international markets, as well as internally to refineries and power plants. Its pipeline network is extensive, totalling more than 7,000 kilometres.
Much of it is either inoperative or unable to function at full nameplate capacity, as a result of three wars, more than a decade of sanctions and poor maintenance, which has caused corrosion and reduced pumping pressure.
The development of Iraq’s oil fields by international oil companies will require hundreds of kilometres of new pipelines to transport the produced oil and gas for processing, storage and eventual export or refining, in addition to enormous injections of capital.
The Oil Ministry is planning a multibillion-dollar programme to invest in its pipeline infrastructure network, overhauling the existing dilapidated pipelines and damaged pumping stations, as well as expanding the network to increase its export options and flexibility in moving crude oil around the country.
According to the MEED Insight Iraq Oil & Gas 2012 Projects Market Report, the cost of replacing Iraq’s entire oil and gas pipeline network will come to at least $12bn. This figure does not include the rehabilitation or construction of new pumping stations and storage facilities.
The government itself is planning an extensive capital spending plan to overhaul the network with new pipelines to increase transport and export capacity. Much of the focus will be on building a gas pipeline network to cope with the increasing volumes of associated gas produced by the fields and to supply feedstock for power stations and industry.
Iraq is in the process of expanding its power sector, adding more than 10,000MW of new combustion turbine generation capacity over the next three years. This will require significant investment to link the country’s power plants with its captured gas plants in time for when the power plants come onstream.
The Oil Ministry’s plans includes the construction of two new dry gas pipelines totalling 3,000km in length and a trans-Iraq liquid petroleum gas (LPG) pipeline at a cost of about $5bn. The plan also covers 11 smaller projects that will cost and estimated total of $1.25bn, according to MEED Insight. Two and half years into the Oil Ministry’s plan, of the proposed schemes, only one has been tendered so far, and this is yet to be awarded.
It is unclear how the deals will be financed. The report highlights that from 2005-12, the Oil Ministry awarded only $229m-worth of contracts for gas feedstock pipelines and plans to spend another $215m until 2014.