Iraq’s Electricity Minister Tries To Explain Continued Supply Problems

Iraq’s Electricity Minister gave a press conference on September 7, 2009 to try to explain Iraq’s long, hot summer. The Minister said Iraq is facing five problems with its electricity supply. First, the country does not have enough fuel to run some of its power plants. Second, the country’s budget problems are limiting the ministry’s spending power to boost and maintain production. The Electricity Ministry’s budget saw a huge increase from $1.389 billion in 2008 to $3.39 billion in 2009, a 144% increase, but almost all of that was went to operational costs. In 2008 the Ministry received $89.1 million for its operational budget, which goes towards salaries, pensions, etc., and $1.3 billion for capital expenditures that paid for infrastructure, and other investments. In the 2009 budget, operational costs shot up 2492% to $2.31 billion, while the capital budget decreased 17% to $1.08 billion. Another issue is that the Ministry has barely been able to spend its money. In 2008 it only expended 12% of its budget. Third, the water shortages and drought are reducing hydroelectric power production. Fourth, the Minister said that his staff had taken serious personal losses, noting 1,000 had been wounded or killed. His last remark was that the huge increase in sandstorms this year is straining the ability of the Ministry to maintain and clean its equipment.

On the positive side, the Minister said that by the end of the year General Electric and Siemens AG should begin work on installing new generators, providing technical assistance and training, and providing spare parts as part of a $3 billion deal signed in December 2008. The Ministry didn’t have the money to pay the two companies at first, but the Finance Ministry has finally okayed the transfer of $2.4 billion to them. Together they are expected to add up to 10,300 megawatts.

As reported before, Iraq has consistently boosted its power production in recent years. According to the Special Inspector General for Iraq Reconstruction, the Electricity Ministry has increased electrical output for five straight quarters. From April to June 2009 average daily production stood at 124,713 megawatt hours. One factor in this increase is the boost in energy imports from countries like Iran. In the second quarter of 2009 Iraq imported an average of 16,237 megawatt hours per day, an 82% increase from the same period in 2008, and a 118% increase from the second quarter in 2007. The problem is that demand has consistently increased since the 2003 invasion above supply, and power delivery is inconsistent across the country. With improved security, the public is also demanding more services. Finally, Baghdad is trying to entice foreign companies to invest in Iraq, and officials are worried that the inconsistent electricity will keep them away. The question is whether Iraq will be able to add enough to its power grid to meet all of these different needs.

SOURCES

Aswat al-Iraq, “$2.4bn to pay for GE, Siemens contracts-minister,” 8/9/09

Al-Shalchi, Hadeel, “Power problems mean Iraq suffers hot summer, again,” Associated Press, 9/7/09

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 4/30/09
- “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/09