Iraq at a crucial juncture
Iraq is on the verge of a prosperous future, and there is a burgeoning world of opportunity for utilities as well, as the infrastructure must be developed to enable a prospective oil boom to occur. But can the powers that be guarantee an environment where companies can be confident in investing?
The figures are staggering. In September the Iraqi government announced $500bn in investment in the country’s energy sector, with the $1.6bn of that sum being allocated to renewables managing to look miniscule by comparison.
Meanwhile the International Energy Agency (IEA) recommended last week that $6bn a year be invested in Iraq’s power sector every year until 2035, in order to transform the country’s economy and “make a major contribution to the stability of security of global energy.”
These are lofty goals indeed for a country that has been devastated by war and negligent governance for decades.
Progress in generating that investment has been complicated by the failure to bring about legislation that can regulate the industry. The spat (over oil rights) between Bagdad and the Kurdish autonomous region is also making matters difficult.
The IEA’s report warns that political consensus on both oil governance and the legal framework is vital to creating the conditions for Iraq to develop its power infrastructure and maximise its oil revenues.
The report emphasises the role gas will play in ensuring Iraq’s energy mix as it seeks to get its power infrastructure up and running, and overall gross power generation capacity is projected to reach 80 GW by 2035.
Insurgency and terrorism if not quelled threatens to seriously hinder Iraq’s ability to support its oil industry through sufficient power generation.
The IEA states that failure in Iraq would have a negative impact on the country and energy markets in general. “Without this transition domestic oil demand would be around 1.2mb/d higher in 2035 and Iraq would forego around $520bn in cumulative oil export revenues.”
Something in the region of 750 people have been killed in the country in the last six months alone and recent reports suggests that Al Qaeda has grown in strength since the US presence began to dissipate following the end of the war last year.
There are some commentators who believe throwing cash at the problem will negate the malign forces rallying against oil and power and government interests in Iraq.
For investment to succeed finance will play a part as well as political consensus and a solid legal framework.
Securing the safe environment needed for employees, buildings and capital to enable utilities to develop in the country is by no means a given at the moment.
For now Iraq is truly at a crossroads.