Industry Trend Analysis - Gas To Dominate Power Sector - MAR 2018

BMI View: Iraq's power mix will remain centred around natural gas-fired generation over the next 10 years, as a sizeable pipeline of gas power plants currently planned and under construction is gradually commissioned and access to feedstock improves. We forecast gas to make up nearly 85% of the power generation mix by 2027.

Iraq Power Sector To Expand
Iraq - Electricity Generation By Type And Capacity Growth
e/f = BMI estimate/forecast. Source: EIA, BMI

Key trends and developments in the Iraqi power sector include:

  • Gas currently accounts for around 82% of Iraq's power generation mix and we expect this dominance to remain in place over our 10-year forecast period. We forecast gas to account for 84% of the mix in 2027.
  • We forecast gas-fired power generation to grow by an annual average of 5.6% between 2017 and 2027. The gradual commissioning of a vast pipeline of new gas-fired power plants currently planned and under construction, as well as the expansion of a number of existing facilities, will support growth in the sector.
  • Recent project announcements indicate that investor interest in the market is slowly rising. Mitsubishi Hitachi Power Systems, General Electric and Siemens have all secured contracts to build or refurbish thermal power projects, chiefly gas-fired, over the last year.
  • In addition, we expect access to gas supply for power sector feedstock to improve, via imports from Iran, and over the longer term, growing production of domestic gas. In June 2017, Iraq finally begun natural gas imports from Iran after a delay to a deal originally signed in 2013. Initially around 7mn cubic metres per day (mcm/d) is being sent to three power plants in the Diyala and Baghdad regions. Post 2020, Iraq's status as a net importer of gas is likely to change, as Iraq utilises domestic supplies through the development of the Miran gas field in the region of Kurdistan ( Gas Imports Support Summer Oil Exports', June 23 2017).
  • Channelling both public and private sector investment into the country's dilapidated power market remains a government priority, and we have seen some progress in that regard - as highlighted by the aforementioned company investment pledges. That said, efforts to reform the sector are facing headwinds, as public opposition to privatisation and increased power tariffs remains high.