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Iraq energy situation is precarious

04 Nov 2012
Like most oil producing countries in the Middle East and North Africa, Iraq’s energy supply depends largely on its oil and gas consumption. According to the International Energy Agency’s (IEA) report Iraq Energy Outlook, energy consumption in 2010 was 38 million tonnes of oil equivalent (mtoe) where about 84 per cent oil, 15 per cent gas and one per cent hydroelectric. It is understandable why hydro energy is at such low contribution though Iraq installed hydroelectricity generation capacity of 2300 megawatt (MW) should contribute more albeit for the reduced flow in Iraq Rivers due to upstream projects in Turkey. Perhaps oil consumption at 32 mtoe is over estimated by the amount of surplus fuel oil that is re-injected back to the crude export, which is over seven million tonnes a year. Of course gas consumption is low because of the flared gas as discussed last week. Nevertheless, in the central scenario where Iraq oil production in 2020 is forecast to reach 6.1 million barrels a day (mbd), IEA forecast energy requirements at 113 mtoe or a growth rate of almost 12 per cent a year that is even higher than the assumed average economic growth rate of 10.6 per cent. With 30 per cent unemployment and with the slow progress of industrial recovery and reconstruction of infrastructure one wonders where this economic growth is going to come from. IEA prediction The numbers become even less plausible when one goes beyond 2020 or considers the higher crude oil production scenario of 9 mbd in 2020. But taking these numbers as they are, Iraq oil consumption will be 75 mtoe or 1.7 mbd and if IEA prediction that no new refinery will come on stream before 2019, Iraq faces the prospect of at least doubling the products imports that are too high now by themselves. At the same time gas consumption is forecast to reach 37 mtoe by 2020 meaning that gas processing capacity will have to increase by at least four fold which again is implausible considering the high cost and complexity of such projects and the time they take to construct. It is true that the per capita energy consumption in Iraq is about 45 per cent below the world average and much lower than the average in neighbouring countries, but the time to 2020 is too short to catch up and the level of work required is formidable. Irrespective of these observations, energy requirements are going to grow substantially because of the pent up demand due to the unstable conditions in the country and the shortages of products and electricity since 2003. In this case Iraq should endeavour to increase efficiency by renewal of its systems, conservation by education and awareness and even with a gradual review of energy prices. If the Iraqis are paying fifteen times the rate for private electricity generation operators, they will not mind a correction to the official electricity prices provided they get it regularly. I do not at this time advocate a substantial increase in prices of electricity, oil and gas products as implied in the IEA report but a gradual increase commensurate with the improvement in the economy will be in order. Shortages of electricity The IEA says that “One of the main obstacles to Iraq’s economic and social development is the lack of reliable electricity supply” and that “Iraq is still struggling to provide basic services, such as electricity and clean water.” The shortages in electricity are well documented and they are the talk of everyday by the public and government. In spite of many promises no target to alleviate these shortages was ever met. Iraqis rely on private generators which are the least efficient, most expensive and least environmental friendly method of providing electricity. Yet the IEA says that “the net capacity available at peak in 2011 was around 9 GW while the estimated net capacity required to meet peak demand was 15 GW, resulting in a need for around 6 GW more available capacity — an increase of around 70 per cent.” Therefore the projected increase in generation capacity from an estimated capacity of 17 GW in 2011 to 60 GW in 2020 in the central scenario is difficult to achieve given the failure of the last decade despite the investment of billions. In all cases electricity generation capacity increase will have to be strongly coordinated with gas production and processing, a thing that is somewhat lacking given the problems between the Ministries of Oil and Electricity. As can be concluded the energy situation in Iraq is precarious despite the country’s endowment with oil and gas resources. The solution may not be easy but every effort must be made to ensure amelioration especially with providing electricity, clean petroleum products and the curtailment of gas flaring. Saadallah Al Fathi
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