Iraq heavy industry energy storage cabinet quote

How can Iraq improve the energy sector?

By mitigating growth and stimulating increased supply, such a reform is key to promoting a more sustainable electricity sector that, in turn, can provide the energy needed for broader economic recovery. Iraq could consider new incentives to stimulate private investment in natural gas projects.

What is Iraq's refining capacity?

Iraq’s total operating refining capacity is about 1.2 million b/d.27 The Iraqi government plans to reduce petroleum product imports by rehabilitating the refining sector and building new refineries, but the government has struggled in its efforts to attract the foreign investment needed in the downstream sector.

Why is Iraq's energy system vulnerable?

However the capacity to capture and process this gas has not kept pace. The inability to utilise its gas riches means that the country's gas deficit has grown, and Iraq now relies on imports from Iran to meet increasing demand. This has introduced a number of vulnerabilities to Iraq’s energy system.

Does Iraq approve a $153 billion budget?

Ahmed Rasheed and Timour Azhari, Reuters, “Iraq approves record $153 billion budget including big public hiring,” June 11, 2023. International Monetary Fund, 2022 Article IV Consultation with Iraq, February 2023, Table 2, page 27. U.S. Energy Information Administration, OPEC Revenues Factsheet, June 2023.

Should Iraq rely on state financing for energy projects?

There has scarcely been a more urgent time for Iraq to pursue crucial reforms in its energy sector to ensure that investment continues even when government revenues have been decimated by low oil prices. The alternative of continuing to rely on direct state financing of large projects only increases the risk that these projects are delayed.

What policy levers can Iraq pull to shore up its current position?

There are a limited number of policy levers that Iraq can pull to shore up its current position. Electricity subsidies cost the state around USD 12 billion per year. Equivalent to around five months of total net revenues at current prices, this burden is particularly acute when the country’s fiscal health is as vulnerable as it is now.