A guiding light for Iraq’s electricity generation
Erbil, Kurdistan
Erbil, Kurdistan
By Abigail Fielding-Smith
In Erbil , the capital of Iraqi Kurdistan, the lights go out every few hours. Unlike in buildings further south, however, the electricity comes back on again within seconds, as the power provider switches sources.
Although it is still struggling to keep up with demand, the power supply in Kurdish areas, which was severely disrupted as long ago as a 1991 conflict with former Iraqi dictator Saddam Hussain, has gone from a pre-2003 low of two to three hours a day to a current average of 20. When a third power plant in Dohuk, in the north of Iraqi Kurdistan, is completed later this year, the local ministry of electricity hopes it will achieve 24-hour supply.
The contrast with the situation further south is striking. Baghdad struggles with rolling black-outs and pressure is growing on politicians to emulate the Kurds’ relative success. Although the Iraqi government has succeeded in doubling power generation, demand has soared, and the shortfall is severely hampering attempts to develop the wider economy.
In 2003, shortly after the US-led invasion, the cost of Iraq ’s electricity reconstruction needs were estimated at $35.8bn. In 2008, the government of Iraq signed contracts with General Electric and Siemens to buy turbines, with a collective generating capacity of about 10,000MW. But Baghdad struggled to pay its first instalment, and was eventually forced to sell more than $2bn worth of bonds to speed up delivery.
The Iraqi ministry of electricity is seeking international power provider (IPP) contracts to help it make up the extra supply it has pledged to create by 2012.
In 2008, Hoshyar Abdul Rahman Siwaily, the Kurdish electricity minister, explained at a national conference how his government had attracted IPPs to make up for a lack of local expertise and capital. Under an IPP deal, a private company finances the construction of a power plant, which it then owns and from which it sells electricity to a utility supplier.
The government in Kurdistan has been able to have two plants built, generating about 1,000MW of electricity, half of projected need, for an initial outlay of about $120m. In return, the Kurdish government undertook to purchase electricity at a minimum price for 15 years.
It helped that the Amman-based IPP in question, Mass Global Investment, is owned by Ahmad Ismail Saleh, who is said to be from the Kurdish region originally. But experts say there are other lessons from KRG’s investment experience.
“In Kurdistan , there are only two entities (the KDP and the PUK parties),” says an international expert who asked to remain anonymous. “Whereas in Iraq there are more, [but] everything is political and everything is corrupt.”
There are also security and political concerns in much of Iraq that do not apply in Kurdistan .
Although the regular vandalism, looting and insurgent targeting of power supply networks since 2003 has been brought under control, the environment in the south remains volatile.
The recent experience of the China National Petroleum Company, whose staff and property in the al Ahdab oil field in Wasit in central Iraq have been attacked several times, has done nothing to encourage prospective investors.
The country is also blighted by political uncertainty in the wake of the country’s March 7 elections which failed to produce an outright victor.
One way the government could persuade IPPs to overlook the risks would be to link electricity to lucrative hydrocarbon deals, experts say. Kareem Wahed Hassan, the Iraqi electricity minister, recently called for power plants to be constructed on the same location as oil refineries.
According to Paal Aarsaether, spokesman for the United Nations Development programme in Iraq , the security improvements made over the past two years make investment in the energy sector a “no-brainer”, given soaring demand. “The risk is relatively high at the moment,” says Mr Aarsaether. “But Iraq will be a completely different country 12 months from now.”
Tagged in: Ahdab Oil Field, Electricity, Erbil, Hydrocarbon, KRG, Kurdistan
