Iraq en­ergy sit­u­a­tion is pre­car­i­ous

“Ac­cord­ing to the In­ter­na­tional En­ergy Agency's (IEA) re­port Iraq En­ergy Out­look, en­ergy con­sump­tion in 2010 was 38 mil- lion tonnes of oil equiv­a­lent (mtoe) where about 84 per cent oil, 15 per cent gas and one per cent hy­dro­elec­tric.”

The Pak Banker - - Front Page - Saadal­lah Al Fathi

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.

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.

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.

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