Iraq faces a stark energy conundrum. The country holds the world’s fifth-largest proved crude oil reserves—at 145b bl, equivalent to 8% of the global total—and is twelfth in terms of global gas reserves—at 131tcf. Renewables are another potential strength, with plans to install 12GW of solar capacity by 2030.
Despite this abundance, Iraq remains dependent on imports from its neighbours to supply its power generation plants, forcing it to rack up billions of dollars in debt for intermittent deliveries of gas and electricity.
Iraq imports some 40–50mcm/d of gas from Iran. In March 2024, Iraq’s Electricity Ministry and the state-owned National Iranian Gas Co. signed a five-year agreement for the supply of up to 50mcm/d of Iranian gas.
The situation has encouraged policymakers to think anew about ways to tap the prodigious gas resources located on the Iraqi side of the border.
Even with the imports, Iraq cannot guarantee 24-hour electricity supplies across the country, particularly during the peak summer demand periods. Iraq’s electricity demand in the summer exceeds 35GW, at least 10GW more than can be provided. The result is frequent blackouts and the overuse of pricey private diesel generators.
“Iraq’s peak electricity demand has reached 35GW and is growing as population increases and lifestyles change in the country,” said Abdulla al-Qadi, Iraq country chairman at Crescent Petroleum.
According to the IEA, by 2030 peak demand is expected to reach nearly 60GW. Assuming 70% of power will be generated from gas, this peak power demand will translate to gas demand of 6–8bcf, based on IEA figures.
About 66% of the power in Iraq is produced by natural gas, followed by 21% generated by burning fuel oil and diesel, noted Qadi. A small portion (6%) is produced by hydroelectricity, with the rest (8%) imported from Iran (up to 1,300MW/yr).
“Natural gas will replace other sources as well as the share of imported electricity in the short-to-medium term. But Iraq will need twice the amount of gas in the coming years to be able to supply demand for electricity, and our projects will help fill a portion of that need,” said Qadi.
Picking up the pace
Improving the electricity generation picture is priority number one. “There has been a chronic electricity supply gap in Iraq,” said Jessica Obeid, an energy specialist at consultancy Azure Strategy. “Although Iraq has installed additional power generation capacity, the demand has been growing, along with the losses.”
Achieving this requires not only power supply and a modernised grid, but also tackling vested interests and non-technical losses, and then a tariff restructure, said Obeid.
The challenge of developing Iraq’s prodigious domestic gas resources has thrown the issue of energy independence into sharp relief. For the government of Prime Minister Mohammed Shia al-Sudani, the need is to improve electricity services that could support economic development, improve government services and build better security.
In human terms, Iraqis continue to bear a heavy price for this situation.
“In a country where temperatures are 50°C in the summer, electricity provision is fundamental to social stability and security,” said Majid Jafar, CEO of Crescent Petroleum, which has been developing gas for domestic use in Iraq since 2007.
Domestic development
Against this backdrop, Iraq has begun to chart a route to developing its indigenous resources, prioritising electricity generation from domestic sources.
In February 2023, during the signing ceremony of the fifth licensing round for Iraqi oil and gas fields, Prime Minister Sudani said his country would achieve gas self-sufficiency and enter the world gas market as an exporter by 2030.
Standing still is not an option, given that the country’s electricity demand is poised to double by 2030, according to the IEA. The IEA states that, if the current structure of electricity supply persists, domestic generation, imports and neighbourhood generation would need to double—for a total supply more than 250TWh.
Reform of pricing and subsidies is a priority. “In many governorates, there are only 4–8 hours a day of electricity in the summer months, so they end up paying much higher prices for diesel generators—which is also bad for the environment,” said Jafar. “There needs to be more rational pricing for electricity, that also manages demand better, so that the outcomes can be better for the consumer.”
While Iraq has managed to maintain impressive oil production in recent years, averaging 4.2m b/d in 2024, it is natural gas that is the centre of attention.
As oil production has soared, so has the amount of associated gas. However, the ability to capture and process this gas has not kept pace. That inability to utilise this potentially formidable resource has accentuated Iraq’s gas deficit.
The supply-demand picture bears this out. Iraq consumed 18.7bcm of gas in 2023 but produced only 9.9bcm; although that is a 6.9% increase compared to 2022, according to Energy Institute figures, closing that gap will be difficult without a concerted drive to boost gas output.
This message has been absorbed at the highest levels. According to a statement issued by Sudani in Washington earlier this year, Iraq has the potential to “harness immense natural gas resources, invest in new energy infrastructure and renewables, and achieve energy self-sufficiency by 2030”.
Ending flaring
The pressing need is to bring on both associated and free gas resources in short order, as well as to quash the wasteful flaring. The flaring of associated gas has grown from 12bcm in 2012 to around 17bcm now, putting Iraq second only behind Russia, emitting 30mt of CO2 annually in the process.
Out of some 3.55bcf/d of produced gas in federal Iraq, 2.1bcf/d is captured and 1.4bcf/d is currently flared. If the government meets its oil production target of 6m b/d, the country is projected to flare an estimated 2.2bcf/d.
Efforts are underway to address this problem. The Shell-led Basrah Gas Company joint venture owns and operates midstream infrastructure to process and transport associated gas from the Rumaila, West Qurna 1 and Zubair oilfields as well as small volumes from the Tuba and Luhais oilfields in southern Iraq. It has one of the world’s largest flare reduction projects, aiming to cut more than 9.5mt of CO2e/boe/yr from entering the atmosphere by reducing upstream gas flaring (compared with 2020 levels).
All this offers material economic and environmental benefits. “Any cubic metre that is captured is a cubic metre of less pollution, and a few dollars more into government coffers, so it makes clear sense,” said Abbas Kadhim, who leads the Iraq Initiative at the Washington-based thinktank the Atlantic Council. “There is an Arab expression that says, ‘what you cannot capture as a whole, don’t abandon altogether’. In other words, capturing even a small amount of flared gas is better than burning it all.”
Capturing flared gas is vital for Iraq’s energy independence plans. Despite progress in natural gas production from both non-associated gas and capturing associated gas, Iraq remains the second-largest gas flaring country in the world. “It would be a major achievement if Iraq’s plans to increase gas production materialise by the projected timeframe, by 2030,” said Obeid.
The Sudani government has been striking new deals to process flared gas in recent months. In April 2024, the prime minister signed an agreement to incentivise investment in processing 300mcf/d of gas at the Bin Umar oilfield. Halfaya Gas Company signed an agreement with Iraq’s South Gas Company to invest in processing the gas, with US companies including KBR, Baker Hughes and GE signing an MOU on the project. The agreements also call for 400km of pipelines to transport the gas, a marine export terminal, a gas processing plant and other facilities.
TotalEnergies’ $27b Gas Growth Integrated Project (GGIP) is another example of how investment is helping recover flared gas power generation.
The GGIP will recover flared gas from three oilfields to supply to power generation plants. The project also involves a seawater treatment plant to provide water injection for pressure maintenance and to increase oil production as an alternative to the use of fresh water. Additionally, a 1GW solar photovoltaic plant will be developed by Saudi Arabia’s Acwa Power.
Free gas
As ambitious as plans to capture associated gas are the schemes to develop the country’s substantial non-associated gas fields, which include Akkas, Mansuriyah, Siba and Khashim Ahmer-Injana.
Crescent Petroleum is part of the Pearl Consortium that is producing from the 500mcf/d Khor Mor field in the Kurdistan Region of Iraq, the country’s largest non-associated gas project, which has been operational for more than 15 years (see sidebar).
“Iraq today needs 4bcf/d of gas,” said Jafar. “But it also needs to develop non-associated fields, whether in the Kurdistan region, Diyala, Anbar or Basrah.”
Given that bringing on these free gas schemes would meet only current demand—Iraq’s gas demand is set to double by the end of the decade, necessitating 8bcf/d—considerably more supply will be needed.
“That is why it is not a matter of either/or,” said Jafar. “It needs all of the above.”
The upside is that Iraq has the potential to meet its own needs in the long term, and to export gas to neighbours such as Kuwait and Turkey. Even LNG exports are an option. “Iraq has not even begun to really explore gas developments in a major way,” said Jafar.
Gas will be fundamental to Iraq’s ambitions towards energy independence, since it is considered a transition fuel, as the COP28 summit in Dubai in late 2023 designated it. That reflects gas’s ability to replace dirtier fuels such as coal. The key is to reduce emissions and then bring in renewable energy sources. The latter’s intermittency issues nonetheless require a stable baseload, which gas is best placed to provide.
Renewable energies will still have an important role to play in helping deliver on Iraq’s energy independence mission. Bringing the share of renewables up to 30% of electricity supply by 2030 would help reduce emissions without raising costs. This could help free up 9bcm of gas for other use by 2030.
Stemming technical and commercial losses in the electricity system is another important step towards shoring up supply and curbing import dependency.
The next years will be crucial for Iraq’s journey to energy independence and the roadmap to delivering on those ambitions is promising. Looking beyond the power sector, the Iraqi government knows it needs local industries to have reliable and cheaply sourced energy supply. The message is clear: gas is key to unlocking the hidden value across the economy that until recently has remained dormant.
This article formed the introduction to our recent Energising Iraq report, produced in conjunction with Crescent Petroleum.Click here to download your free copy.
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