(Energy challenges and development prospects in Iraq)
• Dr. Louay Al-Khatib – former Minister of Electricity
• Falah Al-Amiri – Advisor to the Prime Minister for Oil Policies
• Abdul Hussein Al-Hanin – consultant and expert in energy economics
The platform was moderated by Dr. Alaa Mustafa, Ishtar center advisor and professor of media at the University of Baghdad
With the participation of academic, political and youth figures
The session covered the following topics:
– The oil and gas market and Iraq’s share in global production shares.
– Opportunities to transition to sustainable development by investing in the energy sector in Iraq.
– Possibilities of reforming the energy sector in Iraq.
Report and Outcomes of the Session on Energy Challenges and Development Prospects in Iraq
Speakers on the platform:
- Dr. Louay Al-Khatib (former Minister of Electricity)
- Falah Al-Amiri (Adviser to the Prime Minister for Oil Policy Affairs)
- Abdul Hussein Al-Hanin (consultant and expert in energy economics) Dialogue moderator: Dr. Alaa Mustafa (Adviser, Ashtar Center for Policy Affairs)
Excerpt from Dr. Louay Al-Khatib’s presentation: “Does Iraq have an energy strategy? To address your query on this matter, I’d like to maintain this response. There hasn’t been an accountable person. Referring to my colleague, Dr. Hussein Al-Shahristani (Deputy Prime Minister for Energy Affairs at the time), when asked by the media about the energy use strategy, his response was that energy doesn’t accumulate; it acts and ultimately results in export. The Iraqi media, regrettably, played a role in lacking discipline and conveyed this message incorrectly. There exists a fixed strategy, yet certain governments lack commitment to it. This strategy originated in the 2006 federal government, aligned with an agreement on the Mica Dell project for gas stations, approximately 16 megawatts. Initially formulated in collaboration with the United Nations Development Council and the World Bank, it evolved into the Parsons Pengrove plan, expanding to 30,000 megawatts to meet Iraq’s energy needs by 2030, surpassing current levels. The 2012 energy strategy developed by the Board of Advisors with the World Bank built upon these additions, staying on the planned path. Altering the trade system, a political issue beyond the Ministry of Electricity’s authority, necessitates proposals to the Council of Ministers, requiring support from the ruling political blocs in Parliament. Therefore, any tariff changes demand alterations in tax systems, social security administration, or allocations for social protection networks, particularly for those with limited income. The ISIS crisis damaged 25% of the network’s infrastructure, generating 5,000 megawatts, necessitating extensive reconstruction. By 2015, the network’s production capacity grew from 3,300 megawatts in 2003 to 24,000 megawatts, a fourfold increase. During Mr. Adel Abdul Mahdi’s governance, a 3,000-megawatt addition occurred, with a subsequent 2,000 megawatts added during the caretaker government.”
“Investment and operational spending in the energy sector total approximately 100 billion, with 45% being investment. To provide a comparison, Dubai, with a population density of 3.4 million, currently produces 14,000 megawatts from its industrial cities and ports, amounting to a cost of $44 billion for the government or Emirate of Dubai.”
From the speeches of the key speakers and the interventions of the attendees, the following conclusions were drawn regarding the problems in Iraq’s energy sector:
- Iraq’s energy sector grapples with fragmentation among the ministries of oil, electricity, and industry. This fragmentation results from institutional work overlaps between regulatory agencies and those under regulation. Such fragmentation hampers coordination, fosters mismanagement, and encourages corruption. A lack of effective leadership direction, alongside frequent changes in Prime Ministers and Energy Ministers, has led to a fragmented vision and an inability to capitalize on available opportunities.
- The existing governmental context exerts control through centralized legislation and a socialist approach, conflicting with the 2005 Federal Constitution. This discrepancy hinders the sector’s ability to embrace a market economy and decentralization. These challenges have led to a 55% increase in losses in the electricity sector and a 50% decline in refinery efficiency.
- Frequent changes in energy ministers, numbering around 30 since 2003, have contributed to blurred long-term vision and reduced policy effectiveness. Reliance on centralized legislation and a socialist approach complicates matters, resulting in regulatory conflicts and implementation uncertainties.
- These structural and administrative challenges have spurred energy poverty and misuse, deteriorating public services and fostering illegal energy trading. Energy poverty incurs substantial annual losses of $17 to $20 billion, impacting the public treasury due to ineffective energy subsidies.
Measures proposed to solve the energy sector crisis in Iraq involve comprehensive legal reforms. Initiatives include activating Article 112 of the Constitution to define oil province rights, drafting a federal revenue distribution law based on Article 106, and establishing a federal energy council to coordinate efforts between oil, electricity, and industry ministries. Additionally, activating the Federal Imports Distribution Authority aims to streamline fund allocation and minimize bureaucratic interference.
These reforms underscore the necessity of positioning the energy sector as an economic driver while ensuring sustainability. Encouraging private sector involvement through favorable investment environments and tax incentives is pivotal. Accelerated reforms, improving governance and tax systems, and strengthening regulatory capabilities are essential to effective sector management.
A long-term vision focusing on sustainability and economic opportunities seeks to create an investment-friendly environment that ensures fair wealth distribution and balances the economy with the environment. Environmental monitoring institutions, clean technology encouragement, and renewable energy project development are integral to achieving sustainable energy.
Implementing a tax system to stimulate economic diversification and investment in energy infrastructure is crucial. Supporting Iraqi companies, fostering technology development, and strengthening public-private partnerships for technology transfer and innovation are vital aspects.
Transitioning to a sustainable energy system entails developing transmission and distribution networks, upgrading infrastructure, and using smart technology to enhance network efficiency. Transparency, anti-corruption efforts, robust performance evaluation, and mechanisms for civic engagement are vital elements in achieving effectiveness and integrity in the energy sector.
Realizing these goals necessitates a long-term strategic vision, commitment to activating laws, and bolstering national and international cooperation.
Recommendations to address the energy crisis in Iraq encompass several critical reform steps:
Amendment of the Ministry of Electricity Law:
- This involves the disentanglement of public companies associated with the Ministry.
- It establishes these companies as independent entities based on profitability and loss criteria.
Legislation of a federal law for oil, gas, and energy:
- Aligned with Article 112 of the Constitution and adherent to international standards.
- Creation of a regulatory Ministry of Energy, distinctly separate from public companies.
Separation of public companies from ministries:
- Transforming them into self-sustaining, autonomous operational entities.
- Termination of financial government support; in case of losses, liquidation of assets ensues.
Modification of financial support:
- Tying support to limited financial allocations for individuals registered in social protection networks.
- Anticipated funding from corporate and income taxes.
Determination of return on assets of public companies:
- Predetermined for the benefit of the Ministry of Finance, ensuring a purely regulatory role.
Collaboration with a global consulting company:
- Aims to restructure public companies and bolster their boards of directors.
- Ensures adherence to international standards and professionalism in operations.
Assessment of public company assets:
- Conducted by a global consulting firm for listing on the stock market.
- Accompanied by an incentive package to attract and develop capital in the labor market.
Retention of skilled personnel:
- Surplus workforce transferred to vocational and training centers to meet international standards.
Resolution of conflicts of interest:
- Boards of directors of public companies separated from interventions and contracts with ministries.
- Guarantees independence in executive decision-making.
Appointment of a Deputy Prime Minister for Energy Affairs:
- Permanent presence and chairmanship of the Ministerial Council for Energy.
- Focuses on policy development, supervision of institutional reforms, and public policy enhancement.
Implementation Requirements: Economic and energy reforms in Iraq necessitate robust political determination to secure enduring government support and prevent interventions hindering these reforms. Active government endorsement is crucial, involving disengagement from public sector companies, centering on policy development and planning while evading direct operational management.
Success in this endeavor hinges on the availability of visionary leaders with advanced intellect and international standards. Selecting such leaders is crucial for efficient and effective reform implementation.
The government’s strategy should draw local and international investments, fostering an investment-friendly environment and improving the economic landscape.
Achieving self-sufficiency necessitates adherence to international standards, combatting corruption, and avoiding exclusivity, bolstering Iraq’s international stance and augmenting political and economic stability.
Transitioning toward a self-sufficient future and global partnerships depends on unwavering commitment to these reforms. Emphasis must be on combating corruption, enhancing transparency, and ensuring successful reform implementation
