Iraq’s Management of its Natural Gas Potential - INES Revisited

Iraq’s Integrated National Energy Strategy 2013-2030 (INES) was launched by senior members of Iraq’s government in June 2013. The background work had been carried out by consultants Booz & Company to the terms of reference and briefings of the management team of Iraq’s energy sector. The consultants’ final draft proposal had been submitted 14 months earlier in April 2012. Only the executive summary of INES was made public (MEES, 9 August 2013).

Clearly the objective of the INES report was to draw an optimistic picture of the future of Iraq’s energy sector under the current management. The other objective was, equally clearly, to divert attention away from the actual performance of the management in recent years. The facts on the ground at this time are that Iraq, a major world producer of raw fossil fuels is now an energy importer in terms of the country’s day to day needs of both refined fuels and electricity. INES’s treatment of Iraq’s natural gas resources provides a case in point.

Figure 1 shows INES’s gas export projections from 2015 to 2030. It plots the quantities of net supplies of raw natural gas and the allocations for potential projected demand - electricity, LPG and industrial. Analyses of the amounts of dry gas allotted to domestic consumers as shown in the INES’s chart appear to have been underestimated. For the electricity sub-sector INES assumes that a large portion of Iraq’s public electricity will be supplied by burning liquid fuels: around 75% in 2012, 30% in 2020 then falling to around 10% by 2030. From economic, technological and environmental points of view 100% conversion to gas firing should be proceeded with as a matter of urgency as soon as possible as long as gas is available.

Further analyses show that the amount of Iraq’s natural gas allocated for domestic use as shown in the INES chart (Figure 1) may be just sufficient by 2021 for electricity generation alone. Factoring in other uses will set that date back by some years, if indeed it is ever achieved. The chances of the volumes of ‘excess gas’ indicated by this chart actually materializing are thus highly doubtful up to 2025. INES projections of total natural gas supplies in that period exceed even the “High Scenario” case according to the estimates of the same period given by the International Energy Agency (IEA). The IEA’s ‘Iraq Energy Outlook’ was researched and finalized within the same period as INES, and included Kurdistan, which INES did not. Both the IEA’s Iraq report and INES were launched by Iraq’s Deputy Prime Minister Husain al-Shahristani.

Inconsistencies are also noted when comparing data extracted from the INES chart for the years 2012 and 2013 with those documented by the Ministry of Oil’s own website on the internet.

As can be seen in Figure 2 total natural gas production, as well as the amount flared and utilised for both 2012 and 2013 was considerably lower than those that appear in the INES chart although it stated that its data are derived from the same source, the Ministry of Oil.

The above table shows a comparison of the gas data extracted from INES (Figure 1) for 2012 and 2013 with the data for the same years as averaged from the Ministry of Oil’s official website. The discrepancies between the two sets of data vary between 40% and more than 100%.

Discrepancies such as this throw doubt on the credibility of INES. News of importing natural gas to Iraq first cropped up in 2009 after it became obvious that developing the country’s own natural gas potential had been effectively halted. Even now, in 2014, utilization of Iraq’s natural gas, excluding Kurdistan, is around the same as it was in 2003. Since 2011 two contracts costing Iraq around $720mn have been signed to build two pipelines to import around 1.6bn cfd from Iran, the first in 2011, two years before INES; the second in 2013 the same year. They will come into effect in the second half of 2014 and early 2015. The imported gas will be used for electricity generation within Iraq. It will, therefore, seriously alter the elemental profiles of the various Iraq’s energy constituents for at least one third of INES’s remainder of its strategy period. Not even a hint of this was shown to have been factored into the INES projections.

By the same token, Iraq’s Council of Ministers resolved, also in 2013, to award a $490mn contract to construct a pipeline to export Iraqi natural gas. Iraq has also entered into international negotiations for exporting this gas. The details and their impact on the rest of “the strategy” of this substantial contract and commitments must have been well known to the INES drafters and those responsible for it. Yet the only references in INES to the exportation of Iraq’s gas were cited as “potential”.