Iran Energy News Oil, Gas, Petrochemical and Energy Field Specialized Channel
Related Articles
With Iraq’s hydrocarbons making waves and LNG and KRG oil hitting the headlines, the potential for a bright future in the energy sector is becoming increasingly evident.
Iraq’s hydrocarbon future looks promising if Prime Minister Al Sudani’s government can implement a more functional and feasible investment strategy in the coming weeks. Given its vast hydrocarbon reserves—highly attractive in quality—and its low production costs per barrel, the country should have achieved self-sufficiency and boosted its export potential in recent years. However, internal political constraints and regional politics have blocked progress. Since the inauguration of the Al Sudani government, the picture has changed dramatically. Baghdad is now actively working to reduce its reliance on Iranian energy and establish a more transparent financial framework for investments.
In recent days, Baghdad has been making headlines again. Iraqi officials announced that the country will soon award a contract for constructing an LNG import platform, along with new pipelines to connect to existing infrastructure to power electricity plants in the south. LNG imports will be handled via a floating LNG terminal, according to Hamza Abdel-Baqi, director of the South Gas Company. While no official details have been provided on who will supply the LNG, analysts expect Qatar LNG to play a role, as Iraq previously considered Qatari LNG in 2022.
Despite Iraq’s vast reserves of (associated) natural gas, the country has long been dependent on Iranian gas supplies. However, under regional and global pressure, Baghdad is reducing its reliance on Tehran and seeking additional gas imports from other regional and international partners.
Last month, the Iraqi Ministry of Electricity announced that Turkmenistan would cover around half of Iraq’s power plant demand. The ministry stated that the government is working with the Trade Bank of Iraq (TBI) to finalize financial procedures for securing gas supplies from Turkmenistan. While the deal’s details remain unclear, Turkmenistan and Iraq have signed an agreement to supply up to 20 million cubic meters of gas per day. Currently, 60% of Iraq’s power plants are gas-fired. Alongside these import initiatives, Baghdad is ramping up domestic gas policies, including a zero-flaring target by 2030 and plans to begin production at several major gas fields.
Strengthening domestic gas exploration and production is essential, as reliance on external supplies weakens Iraq’s energy security. Analysts caution that the Turkmenistan-Iraq gas deal may not materialize since the gas would need to transit via Iran, presenting risks. Tehran faces international sanctions, internal political instability, and security threats, which could impact Iraq. If the Turkmenistan deal falls through, Iraq’s alternative would likely be Qatar, but LNG imports remain costly and are only viable as a short-term solution. Most experts agree that Iraq’s best strategy is to fully utilize its existing gas production—currently flared in large quantities—while accelerating development at existing (associated) gas fields and expediting new production capacity.
Natural gas production is vital to meeting Iraq’s growing power needs. A large-scale investment strategy to expand renewable energy is also necessary. Abu Dhabi’s MASDAR, Saudi Arabia’s ACWA Power, and TotalEnergies have already launched solar power projects, but much more investment is needed. The Al Sudani government’s economic diversification drive, which includes boosting non-oil sectors and attracting foreign investment, is expected to push domestic power demand to record levels.
It remains surprising that Iraq’s significant gas reserves are still largely untapped. Geopolitical and internal political alliances have made Iraq dependent on imports, limiting its regional leverage. However, the Al Sudani government’s current approach marks a major step toward regaining some of the hydrocarbon and economic power the country once held.
Meanwhile, another crucial development for Iraq’s future is the improving relationship between the Baghdad government and the Kurdistan Regional Government (KRG). Over the past year, Iraq has faced significant oil revenue disputes with the Iraqi Kurdish region, particularly the KRG government. Political tensions, combined with a lack of transparency in oil revenue disbursements and taxation, have resulted in an estimated $19 billion loss due to a blockade of Kurdish oil exports to global markets. This dispute—centered on revenue sharing and control over oil fields—appears to have eased in recent weeks, as relations between Erbil (KRG) and Baghdad have improved. The KRG Minister of Natural Resources recently told Kurdish news outlet Rudaw that he expects Kurdish oil exports to resume before March. This progress follows the Iraqi Parliament’s approval of a budget amendment to subsidize production costs for international oil companies (IOCs) operating in the Kurdistan region.
