Industry

Iraq Resists US Stress to Scale Back Iranian Gas Imports

Iraq Resists US Stress to Scale Back Iranian Gas Imports

Iraq will struggle to generate sufficient electricity unless it continues to make use of Iranian gas for three to four more years, the electricity minister stated Tuesday, countering U.S. pressure to stop the imports from its Middle East neighbor.

Iranian oil exports have plunged since the United States forced new sanctions on Iran this year, seeking to separate the Islamic Republic in a row over its nuclear goals.

Iraq has a U.S. waiver to import Iranian gas; however, Washington has been pressing Baghdad to phase them out.

Power cuts in Iraq have often triggered protests in opposition to the authorities. Iran supplies sufficient gas to power 2,500 megawatts (MW), in addition to providing Iraq with 1,200 MW in direct power supplies.

The minister said Iraq now had the capability for 18,000 MW, up from 12,000-15,000 MW in 2018; however, still below peak demand that could hit about 25,000 MW.

Exports of gas to Iraq and exports of refined products to international markets remain a vital source of earnings for Iran.

The minister said the power industry required investment worth not less than $30 billion to upgrade the grid, which was five decades old and had lost 25% of its capacity because of Islamic State attacks.

Al-Khateeb stated Iraq was paying for Iranian gas based on a method averaging nearly 11% of the price of benchmark Brent crude oil or around $6 per million British thermal units (MBTU). This compares to $2-$3 per MBTU in the oversupplied U.S. marketplace.

Iranian gas imports could be scaled back if Iraq used more of its gas reserves rather than flaring it, or burning off the related gas that’s generated throughout oil extraction.

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