The demonstrations across Iraqi cities are now a daily news item. The demand is for a lot of political and economic changes and demonstrators are blaming the government for inaction in bringing corrupt officials to justice.
Some groups even demanding the dissolution of the constitution and parliament and reconstituting the council of ministers to include only independent technocrats, having lost faith in politicians and accusing them of covering up for each other.
The whole thing started towards the middle of July when Basra demonstrators demanded better electricity supply at a time when temperatures often went beyond 50-degree centigrade. The protests spread to the rest of southern Iraq and Baghdad and may turn into more radical civil disobedience if the government does not move fast enough with reforms.
It’s no wonder that dismal electricity supply can trigger a revolution as this service is so vital to the livelihood of everyone and for the economy. In 2011, the Ministry of Electricity, said installed generating capacity is 16,854MW, while average annual production was only 6,153MW, or 36.5 per cent of capacity. Supply to consumers was 4,693MW, meaning losses were 24 per cent.
The US Energy Information Administration said in its “Iraq Country Analysis” that in 2012, supply was 66 billion kWh, or an average of 7,534MW including imports of about 913MW. Distribution losses on average between 2005 and 2012 were 36 per cent. Off-grid generation in businesses and households is close to 1,000MW in Baghdad alone, bringing much strain on light fuels of gasoline and diesel.
Troubled industry
In 2008, Iraq bought 74 gas turbines generators with a combined capacity of 10.2MW. But most of these remained largely in suboptimal storage conditions for lack of budget or fuel, and — most importantly — for a lack of engineering efforts to turn equipment into working power plants.
Electricity is the most obvious manifestation of the troubled Iraq energy industry but not the only one. Crude oil production is now largely in the hands of foreign oil companies and the experienced Iraqi companies are marginalised.
Production increased from 2.4 million barrels a day (mbd) to 3.3-mbd in June, where billions of expenditure and high unit production cost — unheard of in the development of Iraq oilfields — were experienced. After the fall in oil prices, Iraq is finding it difficult to pay back the oil companies and may have to allocate about a quarter of its production to this purpose.
As for the north and west of Iraq, the rise of Daesh has stopped development there. The Kirkuk oilfields are now under the control of the Kurdish Peshmerga, while Daesh occupies the Qaiyara field and even the Salah Alden fields too.
Problems between the central government and the Kurdish Regional Government (KRG) are persistent and do not seem to render themselves to a solution. The KRG is operating independently and challenging the government at every step since it signed 58 contracts with oil companies and without the knowledge or approval of Baghdad.
The KRG is exporting oil independently thereby negating the latest agreement with the Ministry of Oil to export through the state marketing company SOMO. This situation is untenable and it does sow the seeds for future conflict of untold consequences to Iraq.
Investors
Iraq is finding it difficult to supply the domestic market with petroleum products because refineries of 0.9-mbd are operating at not more than 70 per cent. The problem is intensified by the Daesh occupation of Baiji and which has rendered the largest refinery inoperative.
On average, Iraq is importing about 90 thousand barrels a day of light petroleum products (LPG, gasoline, kerosene and diesel) since 2004 and shortages are frequent. The imports may have cost Iraq close to $40 billion which would have been sufficient to modernise the refineries, adding new capacity and produce better quality products.
The four new refineries announced in 2010 are waiting for investors, which are unlikely to come. Iraq awarded one refinery of 140,000 barrels a day at a cost of more than $6 billion which is almost 40 per cent over the per barrel cost of similar new refineries in the region.
Gas processing in the north and south has a combined capacity of 16.5 billion cubic meters (BCM) a year. But it operates at 44 per cent of capacity. In June, the Ministry said flared gas amounted to 1,491 million cubic feet a day, which at the current rate is 15.6-BCM a year or the equivalent of 270,000 barrels a day of oil.
The government, however, finds it easier to import gas from Iran at great cost and even that is delayed.
The energy sector is vital for the welfare of the people and unless the government takes drastic action to revitalise the sector, it could be undermining itself forever. And the protests will continue across Iraq.
The writer is former head of the Energy Studies Department at the Opec Secretariat in Vienna.
