By Bryant Harris for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

US provides Aid to help Iraq fight Coronavirus

The US Embassy in Baghdad announced today that is providing $670,000 to help Iraq fight the novel coronavirus pandemic.

“Today’s announcement shows the strength of the US and Iraqi partnership, and we are committed to fighting this pandemic alongside the Iraqi people,” said US Ambassador to Iraq Matthew Tueller. “Support provided through the [World Health Organization] will directly enhance the country’s ability to combat the spread of COVID-19.”

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By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund. This article was originally published by the LSE Middle East Centre.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iraq’s Power Conundrum: How to Secure Reliable Electricity While Achieving Energy Independence

Iraq remains in a bind regarding how to secure energy independence within its geopolitical constraints – most pertinently the American sanctions on Iran. The US is continuing to maintain pressure on Baghdad by extending ‘final’ waivers on the purchase of Iranian gas for only another 30 days, as part of its new tougher stance.

Iraq, in response, could produce credible plans to eliminate its dependence on Iranian imports, which it accelerated with the approval in January of the fifth round of gas exploration contracts. However, achieving this would not end the need for Iranian imports, nor would it secure any kind of energy independence. More importantly, it will not change the shortages in the provision of electricity, which have served as a lightning rod for public anger over the failings of the post-2003 system.

Appreciating the dependence on Iran for the provision of electricity means delving into the extraordinary mess that is Iraq’s power grid, consisting of the power plants that generate electricity; transmission system that transport this electricity to population centres; and distribution networks which then distribute this electricity to end users. Decades of conflict have damaged most parts of the grid and, coupled with poor maintenance of the parts that escaped damage, this has rendered the grid impotent.

Rebuilding the grid post-2003 was hampered by the rolling dysfunction of successive governments, in which significant capital expenditures were neutralised by mismanagement, lack of coordination between ministries, and the county’s corrosive corruption. The public’s frustration over this impotence extends beyond the inadequate provisioning of electricity throughout the year, as the summer’s intense heat creates a particularly acute need for electricity, exposing the grid’s shortcomings.

These start at the generating stage with the gap between nameplate capacity, i.e. the maximum sustainable power output under ideal conditions, and actual output. While a gap always exists between these two, in 2018 the nameplate capacity was 30.3 gigawatts (GW), while effective capacity through the year was a mere 11.9 GW. A primary reason for this gap is the lack of appropriate fuel supply, in this case gas, which leads to substitutions by fuels such as crude or heavy fuel oil with the result that plants run at less than 60% of capacity – in 2018 only 62% of operating gas-powered plants actually used gas. Other reasons include poor maintenance and lack of cooling in high ambient heat. Moreover, up to 20% nameplate capacity in 2018 was non-operational.

In turn, this increases the gap between demand and supply – in 2018 average demand was 17.7 GW vs. effective generated power of 11.9 GW. But this gap is only part of the story, as the electricity generated to meet demand does not mean that it was actually delivered to end users. The total electricity generated in 2018 was 105.4 terawatt-hours (TWh), but only 43.7 TWh reached end users for a loss of 58.5%. Most of these losses take place at the distribution stage, with technical losses stemming from age, conflict damage, poor maintenance accounting for two thirds, and non-technical losses, mostly electricity theft, accounting for a third. Technical losses are natural, however they occur at an extremely high rate in Iraq, as do non-technical losses. Stolen electricity – still consumed but not billed – is estimated at 17 TWh, and so the electricity delivered would rise to 61 TWh, equating to a loss of 42.2%. This dynamic can be seen below.

Figure 1: Comparison between electricity demand and supply, 2010-18

The increase in losses from 2014 onwards can be attributed to the ISIS conflict, which damaged 20% of the transmission system and 5.0 GW of generating capacity. 2019 saw meaningful improvement as effective capacity increased from 11.9 GW to 14.3 GW, and crucially during the summer months peak generation was 19.3 GW vs. peak demand of 27.5 GW. This gap of 8.2 GW has narrowed from 2018’s 10.0 GW gap when peak supply was 16.5 GW vs. peak demand of 26.5 GW.

Electricity generated from Iranian electricity and gas imports accounted for 20.7% of that generated throughout 2019, and probably a much higher percentage during the peak summer months. These contributions from electricity imports from 2010 and gas imports from 2017 can be seen below.

Figure 2: Iranian contribution to Iraq’s energy requirements between 2010-19

The importance of Iranian electricity imports as a percentage of the total have steadily decreased, even though they increased in absolute levels; nevertheless, the decline in summer of 2018 was large enough to ignite the demonstrations in Basra. Imports in 2019 returned to the trend line and averaged 1.1 GW for the year. Plans for other regional imports include 0.5 GW to be imported from Kuwait by the end of 2020, rising to 1.9 GW over subsequent years, including planned imports from Jordan and Turkey.

Iranian gas imports were 7.0 billion cubic meters (BCM) in 2019, up from 4.1 BCM in 2018, and accounted for 31% of total gas consumed – up from 24% in 2018. Plans for increased domestic production include increasing captured flared gas to 16-19 BCM by end of 2021 from 12 BCM in 2019. Additionally, the fifth round of gas contracts call for replacing Iranian imports in three years, i.e. generating 7.0-10.0 BCM over that period from the current 3.5 BCM.

Assuming that the government executes these plans, in three years’ time this would replace the current electricity produced by Iranian imports. But demand is set to increase by 20% from current levels, meaning that the current the gap between supply and demand would increase by up to 20%. Moreover, planned capacity additions require additional fuel, which under existing plans is earmarked to replace imported gas. However, maintaining Iranian imports would significantly decrease their importance in power generation from the current 20.7%, and in the process Iraq would add meaningful capacity to address demand.

The goal posts are moving much faster than Iraq’s ability to approach them, and as such the US’s insistence on eliminating Iranian imports, far from achieving energy independence for Iraq, would instead exacerbate its energy vulnerabilities. Compounding these vulnerabilities is the massive investment spending needed to expand the grid’s capacity, currently unaddressed in the government’s structurally unbalanced budget, but which is ever more critical following the collapse of oil prices.

Iraq’s pathway out of this predicament, even at much higher oil prices, involves electricity tariff reform and the removal of energy subsidies, both the source of monumental waste and substantial market distortions. However, this requires a popular buy-in and for the increasingly alienated population to renew their belief in the post-2003 system’s legitimacy. It is here where the international community can help Iraq achieve energy independence.

Sources

The figures and charts used in the article are the author’s estimates, and are based on data from the Ministry of Electricity’s annual reports and conference presentations, the IEA, BP, MEES, Oxford Energy, and publicly available news sources. However, all errors and omissions are the author’s own.

The data used in the article exclude electricity demand and generation in the Kurdistan Region of Iraq (KRI). However, figures for locally produced and consumed gas include the KRI, and as such the Iranian-origin percentages of total gas consumed would be somewhat higher than the 31% and 24% used if the KRI was excluded.

Disclaimer: Ahmed Tabaqchali’s comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

 

By John Lee.

IFC, a member of the World Bank Group, is investing over $26 million in a new 161-bed hospital in Erbil in the Kurdistan Region of Iraq.

The facility will increase the availability of quality healthcare services and help address gaps in the country’s healthcare infrastructure. The $92 million Seema Hospital project is expected to open its doors in 2021. In addition to providing core health services, it will be one of the city’s first private hospitals with oncology, radiotherapy, and burn units.

Treatment capacity in existing public and private healthcare facilities in Iraq is limited, with damages to the system estimated at $2.3 billion because of the conflict, according to a World Bank report. The hospital is owned by the Macrom Company for General Trading.

Yaseen Al Bazzaz, Chairman and Chief Executive Officer of Macrom Company for General Trading, said

“Since opening our first hospital in 2006, we have grown into a leading provider of specialized health care services … Hundreds of patients are traveling desperately to neighboring countries for their medical needs. This will change once Seema Hospital opens and provides top-notch healthcare solutions.”

IFC is also contributing technical expertise, advising on environmental and social best practices, and providing guidance on corporate governance. The project is part of the World Bank Group’s strategy in Iraq to develop social infrastructure. Seema Hospital also will be one of the first buildings in Iraq to be certified by IFC EDGE, a platform that helps to determine the most cost-effective options for designing green buildings.

Tomasz Telma, IFC’s Senior Director for Manufacturing, Agribusiness, and Services, said:

“Iraq is a priority country for IFC, and we are committed to supporting its economic growth and health infrastructure … Investing in quality hospitals helps improve care, especially where there is often limited access to effective secondary and tertiary facilities, and introduce expertise, technology, and best practices to these markets.”  

IFC has increased its investments in Iraq during the last decade. Its committed portfolio stands at about $254 million, up from $20 million in 2010.

As Iraq and other countries battle COVID-19, the World Bank Group, in response to the crisis, has announced $14 billion package of financing to help support  countries to strengthen health systems and improve disease surveillance worldwide.

(Source: IFC)

By John Lee.

Genel Energy‘s newly-appointed Senior Independent Non-Executive Director and Deputy Chairman has purchased shares in the company.

Former UK Minister for Defence Sir Michael Fallon bought 9,000 shares on Thursday at £1.0967 per share, for a total price of £9,870.30.

He was appointed to the board in early February.

(Source: Genel Energy)

Due to a combination of security conditions and restricted travel options as a result of the global COVID-19 pandemic, the US State Department has ordered the departure of designated U.S. Government employees at the U.S. Embassy in Baghdad, the Baghdad Diplomatic Support Center, and the U.S. Consulate General in Erbil.

Visa services at both posts remain suspended.  The U.S. government has limited ability to provide emergency services to U.S. citizens in Iraq.

Please note that the U.S. Embassy in Baghdad is not providing public services.  U.S. citizens in the Iraqi Kurdistan Region who need emergency services can contact ErbilACS@state.gov.  U.S. citizens elsewhere in Iraq should contact BaghdadACS@state.govfor emergency assistance.

If you are a U.S. citizen in Iraq on a temporary visit and desire assistance to return to the United States when a flight is available, please contact ErbilACS@state.gov or BaghdadACS@state.gov.

Actions to Take:

  • Depart Iraq by commercial transportation as soon as possible
  • Monitor local media for updates
  • Review personal security plans
  • Remain aware of surroundings
  • Review the complete Travel Advisory for Iraq
  • Visit our website for Travel to High-Risk Areas

Assistance:

  • American Citizen Services Unit, U.S. Embassy Baghdad (public access suspended) or U.S. Consulate Erbil – 413 Ishtar, Ankawa, Erbil, Iraq

(Source: US Embassy)

By Hassan Ali Ahmed for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

 Iraqi government officials, clerics unite against COVID-19

As the number of coronavirus cases grows rapidly in Iraq, the Shiite religious establishment is offering to help the government, campaigning against extremist groups that oppose health experts’ recommendation to close holy shrines and mosques.

On March 24, Iraq reported a total of 316 coronavirus cases and 27 deaths, an increase of 50 new cases and four more deaths overnight, a substantial increase in number.

Click here to read the full article.

By Bryant Harris for Al Monitor. Any opinions expressed here are those of the author and do not necessarily reflect the views of Iraq Business News.

Coronavirus forces partial US troop drawdown in Iraq

The US-led global coalition to defeat the Islamic State announced today that the coronavirus pandemic has forced “temporary adjustments” in the mission against the terrorist group.

“The unprecedented challenges posed by the COVID-19 pandemic to the Iraqi and Syrian people, and to our mission, led to temporary adjustments to protect the force during this period, in full coordination with the Iraqi authorities,” the coalition said in a joint statement today released by the US State Department.

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By John Lee.

The China Petroleum Engineering & Construction Corp (CPECC) has reportedly won a $203.5 million engineering contract to treat sour gas at the Majnoon oilfield in Iraq.

According to Reuters, the field is now producing around 240,000 barrels per day (bpd), with plans to boost output to 450,000 bpd in 2021.

Originally awarded to Shell (45%), Petronas (30%) and the Maysan Oil Company (25%) in 2009, the field was taken over by the state-owned Basra Oil Company (BOC) at the end of June 2018, with operations and maintenance contracted to Chinese company Anton Oilfield Services Group (Antonoil) and the US company KBR.

(Source: Reuters)

By John Lee.

The China Petroleum Engineering & Construction Corp (CPECC) has reportedly won a $203.5 million engineering contract to treat sour gas at the Majnoon oilfield in Iraq.

According to Reuters, the field is now producing around 240,000 barrels per day (bpd), with plans to boost output to 450,000 bpd in 2021.

Originally awarded to Shell (45%), Petronas (30%) and the Maysan Oil Company (25%) in 2009, the field was taken over by the state-owned Basra Oil Company (BOC) at the end of June 2018, with operations and maintenance contracted to Chinese company Anton Oilfield Services Group (Antonoil) and the US company KBR.

(Source: Reuters)