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Iraq may lower reliance on Iranian gas, electricity next year: deputy prime minister

Highlights

Trying to woo Saudi, US investments to lower reliance

Iraq just signed $8 billion worth of energy deals with US

Saudis may be interested in investing in Ar Ratawi gas project

Dubai — Iraq could lower its reliance on Iranian gas and electricity imports next year if OPEC's second largest oil producer can implement multi-billion deals signed with US companies and attract Saudi investments, the deputy prime minister said Aug. 21.

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Iraq signed $8 billion worth of energy deals with US companies during this week's visit of Prime Minister Mustafa al-Kadhimi to Washington, his first state visit to the US since assuming office in May. At the same time, Iraq is trying to woo Saudi investments and link its electricity grid to the Gulf grid through Saudi Arabia and Kuwait.

"I assume that the dependence on Iranian gas and electricity imports will begin to trail down significantly sometime next year, but between now and then we have little options except to continue to draw on this source," Ali Allawi, who is also finance minister, told a webinar organized by the Atlantic Council.

"It is unlikely that we can find a short-term substitute, but a medium-term effort can be done by linking the Iraqi grid to the Gulf grid. These are again projects that are on the verge of being defined and designed and put out to tender."

Iraq is under US pressure to wean itself off Iranian electricity and gas imports, which are needed due to power shortages and flaring of associated gas that is also bound by production limits due to the country's attempted adherence to OPEC+ oil output cuts.

Deadly protests last month prompted Iraq to come up with short-term solutions to the electricity shortage, a chronic problem that has led to protests in previous peak summer months when temperatures soar to 50 Celsius.

Ar Ratawi project

As part of the $8 billion deals inked during Kadhimi's visit, Honeywell and Iraq's oil ministryagreed "to advance the development of the Ar Ratawi gas project, which will further enable Iraq to capture, process and utilize indigenous gas resources to meet domestic energy demand," according to an Aug. 19 statement from the US Department of Energy.

Allawi said Iraq is seeking financing from the US Export-Import Bank and other financing institutions to help fund the Ar Ratawi project.

"Baker Hughes and the Ministry of Oilagreed to further collaboration on flare gas-to-power opportunities, and deployment of US oil field services and equipment," the statement added.

Saudi Aramco and ACWA Power, the power and water company 25% owned by the Saudi sovereign wealth fund, could be among the players in Iraq's energy sector, Allawi said.

"The cooperation with Saudi Arabia... is focused now on getting the major Saudi stake-holders like Aramco and ACWA to be involved in the gas gathering in the Ar Ratawi project," the minister said. "And the reason why the Saudis are interested in this is because you can actually ring-fence it so that you do not have to deal with the red tape and bureaucracy that bedevils foreign investors."

GE deals

Iraq signed in 2019 an agreement to link its power grid to that Gulf Cooperation Council's network and import an initial 500 MW of electricity through a connection from neighboring Kuwait. The Gulf Cooperation Council includes Saudi Arabia, Kuwait, Bahrain, Qatar, the UAE and Oman.

During Kadhimi's visit, GE and Iraq's ministry of electricity also signed agreements to boost power supply and strengthen its interconnection with neighboring countries, according to the Aug. 19 statement.

According to an Aug. 19 GE statement, the company signed agreements with Iraq's ministry of electricity worth more than $1.2 billion.

"In addition to delivering the scope of services, GE will also work with multiple export credit agencies to facilitate the discussion of financing over $1 billion for the projects," the statement added.