Iraq priority is local power demand, not exports

By Amena Bakr

ABU DHABI (BestGrowthStock) – Iraq would not be able to supply gas to Europe via the Nabucco pipeline before domestic power needs are met and this will not happen for six to seven years, Iraq’s deputy oil minister told Reuters.

“Is it possible to have your people in need of energy at home and then you go out and pump gas to Europe?” asked Motassam Akram Hassan in an interview on the sidelines of an industry conference in Abu Dhabi.

“Personally I don’t think the Nabucco project will happen before six or seven years,” he added.

The pipeline, which aims to reduce Europe’s energy dependence on Russia with a new flow of gas from the Caspian and Middle East, is expected to cost about $10.50 billion and is seen coming on line with about 15 bcm of gas.

The Nabucco consortium — which includes Austria’s OMV (OMVV.VI: ), Hungary’s MOL (MOLB.BU: ), Romania’s Transgaz (TGNM.BX: ), Bulgaria’s Bulgargaz, Turkey’s Botas and Germany’s RWE (RWEG.DE: ) — is confident it can start negotiations to fill the pipeline and make a final investment decision before the end of 2010.

The first gas, most likely from Iraq, is expected to flow through the pipeline in the last quarter of 2014, although shareholders have also raised the prospect of tapping supplies from Turkmenistan and even Iran in the longer term.

Seven years after the U.S.-led invasion, Iraq’s national grid still only supplies a few hours of power each day.

Intermittent electricity is one of the public’s top complaints. Iraq’s available power capacity is about 9,000 MW, and installed capacity at 11,000 to 12,000 MW. Demand is estimated to reach 14,000 MW during summer when temperatures frequently exceed 50 degrees Celsius.

“During the summers the electricity shortages are a huge issue and the summers will come round again so supplying domestic power for the country is a top priority,” said Hassan.

Earlier this month, Iraq auctioned three major natural gas fields to foreign companies.

South Korea’s Kogas and Kazakhstan’s KazMunaiGas Exploration & Production won a deal to develop the largest of the three, Akkas gas field in western Iraq.

Kuwait Energy and Turkey’s TPAO won the bid for Siba gas field in Iraq’s southern oil hub of Basra, while TPAO, Kuwait Energy and Kogas won the third gas field, Mansuriyah, near the Iranian border in the Diyala province.

“The combined reserves of those gas fields is estimated to be 11 billion units for the three fields…we are not planning to tender any other gas fields, but there might be a few gas tenders out soon in Kurdistan,” said Hassan.

OPEC QUOTAS

Iraq is one of OPEC’s founding members but has been exempt from quotas for years due to sanctions and war.

In March Iraq said it would participate in OPEC agreements to curb oil supply when output reached 4 million mpd.

“I think that we would have an OPEC quota in about three years from now,” said Hassan.

Baghdad holds ambitious deals with the world’s biggest energy companies to boost output to around 12 million bpd in around seven years from just 2.5 million bpd.

“This target is very possible and that’s what we plan for…we plan to honor the deals that we made with companies this year and last year,” he added, declining to comment if any guarantees were given to the firms.

Iraq priority is local power demand, not exports