Saudi Arabia, Iraq sign agreement to link electrical power grids

Saudi Arabia and Iraq signed a memorandum of understanding Jan. 25 to connect their electricity grids, as OPEC's two largest oil producers work together to help reduce Baghdad's dependence on Iranian energy imports.

Saudi Arabia, the world's largest crude oil exporter, will aim to "achieve optimal investment" in the electrical connection with Iraq, the kingdom's Energy Minister Prince Abdulaziz bin Salman said during a virtual signing ceremony.

Iraqi Electricity Minister Adel Karim said the link-up would be completed within two years, according to the state-run Iraqi News Agency, though no details of how the grids will be connected nor how much electricity will flow into Iraq were released.

Integrating regional grids has long been on the agenda of various oil producers in the Gulf.

The Gulf Cooperation Council, which comprises the six largely oil-trading countries of the Persian Gulf, have an interconnection authority to ensure the stability of regional grids.

Baghdad, OPEC's second largest oil producer, and energy-deficient Jordan have been in discussions to join the GCC grid.

Including Baghdad in the regional grid followed a study " that showed that the linkage provided promising opportunities between the two countries," Prince Abdulaziz said.

Iraq is under increasing pressure from the US to wean itself off electricity and gas imports from Iran, which has been subject to US sanctions since 2018. The US has issued Iraq a series of sanctions waivers to continue importing Iranian energy but has warned the waivers could end if Baghdad does not make serious progress toward finding other fuel and power sources.

Broken power infrastructure

The Iraqi power grid remains precarious after years of war destroyed critical utility infrastructure. Intermittent supply of gas and electricity from Iran has contributed to widespread power shortages in Iraq, particularly in the summer when temperatures have soared to 50 degrees Celsius, especially in the south.

On several occasions, the power outages have sparked citizen demonstrations, in some cases blockading oil fields.

The country has been courting multinationals such as Germany's Siemens and GE to rehabilitate its war-torn infrastructure.

To boost its domestic power generation, Iraq is looking to add more capacity to grid and reduce flaring of gas from its oil fields.

Iraq has also received investment from oil exporters in the region such as the UAE, in conventional utilities and a planned solar project.