Catching up

A woman walks past a Basra Electricity Company power plant that has seen better days.

Powering Security
It is widely recognised that in order to finally secure Iraq and extend the central government’s reach to all parts of the country, extending and maintaining core government services—including electricity—to all parts of the population is fundamental.

Still, for contractors, working on large immovable infrastructure projects located in Iraq’s most densely populated regions will be a very different security challenge to the one now eagerly taken on by the oil companies.

Iraq’s oilfields are in most cases located in the sparsely inhabited southern desert, and where fields in more populated and unstable areas were offered, few—if any—oil companies were willing to sign up.

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The Iraqi security forces will have to issue strong guarantees of permanent security deployments around most power project areas for the foreseeable future. Even with such guarantees in place, the Electricity Ministry is still likely to face problems in securing bids for projects in some of the more unruly areas of the country, including the key Kirkuk flashpoint region and northern oil hub, despite the desperate need to extend reliable power supplies to these areas.

Progress, but is it too much too fast?
It finally appears that some key electricity projects will move ahead, able not only to power the most crucial infrastructure and oil industry installations, but to actually change the power supply situation in Iraq permanently.

It will nevertheless be a tall order for Iraq to ensure that projects can go ahead where most needed from a security point of view—and perhaps even more so from an overheating-sector point of view.

It is almost impossible to see all Iraq’s oil, gas, and power projects being able to proceed simultaneously—especially given the absolutely massive scale of its oil projects over the coming decade. Delays and bottlenecks will be inevitable, as will rising costs and skilled labour shortages.

Still, the situation today calls for a considerable dose of optimism, with stable power supplies—albeit at a slower pace than hoped for—returning to the secure parts of Iraq and likely to be gradually extended into the more unstable parts of the country as we approach the middle of the decade.

Undertaking some of these EPC contracts will be a significant security challenge for contractors, with what still exists of the domestic engineering industry likely to be working on smaller projects on the outskirts of unruly areas, with larger international outfits striving to rebuild the power sector in the stable parts of Iraq.

Q&A: the inside view
Luay al Khateeb, executive director at the Iraq Energy Institute, spoke to Utilties Middle East on the sidelines of the Al-Tamimi ‘Doing business in Iraq’ conference.

How important is the issue of security in the quest to rebuild Iraq’s power infrastructure?
Security is one aspect but not the main aspect, because the security situation now is much better than two years ago. I would have said that the security situation will improve even more, but now with the political dynamics after the election and the stalemate continuing around the formation of a government, its going to be quite challenging.

So security remains a concern, alongside corruption, and I would also add bureaucracy to the list. You really need to have a supportive business community to sustain big projects, and make them happen. For it to happen, current legislation and regulation needs significant reform across the board.

What stands in the way of reaching the necessary levels of power generation?
Unfortunately in Iraq we do not have a master plan as such when it comes to power generation. We have the minister of oil thinking something different to the minister of electricity. Electricity generation in Iraq is very much powered by gas.

At the moment, there is no master plan for gas. There are business proposals from various companies. But when you get into the details of those they do not allocate a realistic volume of feedstock to elevate the level of production of electricity to reach the acceptable level. So far we are producing 5.5GW of electricity, whereas we should reach at least 24GW.

Are you optimistic that these targets can be achieved?
If there is a proper policy at a national level when it comes to a gas master plan, I think its possible to reach that goal in four years. If you take it of the governments hands and leave it to the private sector to secure affordable feed stock, it is possible, I’m sure. But if the government continues to control their play I don’t think Iraq will witness any development, and instead we will witness another seven years of the same.

How important is a stable electricity supply for the development of Iraq?
Quite important, because when we talk about electricity we talk about energy security for industry and agriculture and so on. We are talking about the complete value chain for the welfare of the population, not just about switching the lights on. It is about making sure that Iraqi fruits are more affordable than fruit imported from Europe, which at the moment is much cheaper than domestic produce.