Energy Promises Fade as Iraq Faces a Long Hot Summer

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2 days ago

The ambitious plans of Iraqi Prime Minister Al-Sudani to reinvigorate paused agreements and forge new initiatives in the state's vitality sectors with the world's energy giants—from Eastern Asia to Europe and the U.S.—were seen as potential drivers for achieving energy independence and rapid development. These moves also seemed to bolster his bid for a second term as Prime Minister. However, recent developments show a difficult road ahead, despite significant steps taken toward his goal.
Iraq's energy infrastructure, already in disrepair before 2003, was further weakened by civil wars, terrorism, and the failure of previous governments to act decisively, despite generating over $1.1 trillion in oil revenues by 2022, to close the gap between energy supply and demand. This failure cost several former prime ministers their chance at a second term. Al-Sudani's energy agreements, initiated early in his administration, were expected to address these longstanding challenges. However, recent political turbulence and the looming summer heat may intensify the crisis, as unrest has already erupted in southern provinces this week.
Despite having one of the highest population growth rates globally and in the region—with the population nearly doubling over the past two decades—by 2022, over 40% of Iraqis still lacked access to clean drinking water and faced more than a 40% shortfall in public electricity supply. Around 25% of the population remained in poverty, average income levels had declined by roughly 40% compared to the late 1970s, and the unemployment rate stood at 15.53%, showing only minimal improvement from the same rate in 2020. These figures collectively highlight the post-2003 governments' failure to deliver economic development and public welfare.Although Iraq produces around 4.0 million barrels of oil per day—making it the second-largest producer in OPEC and the fifth globally—improvements in the energy sector were expected to be among the quickest gains backed by oil revenue investments. From the beginning of Al-Sudani's cabinet, major downstream oil and gas projects were outlined, such as the construction of new refineries, rehabilitation of damaged facilities, and installation of new pipelines to deliver fuels to power stations. Initiatives in power generation and transmission—such as building new power plants, securing fuel supplies, and upgrading aging infrastructure and the national grid—were also defined. However, the outcomes, especially in meeting electricity demand, still fall well short of the country's needs.
The limited domestic electricity production—strained further by rapidly rising consumption and growing public expectations for a modern lifestyle, especially compared to Gulf countries—has fueled dissatisfaction. These issues have ranked high among grievances that sparked protests over the past decade. Although the current cabinet's actions in the energy sector were expected to alleviate these concerns, the matter remains a critical factor likely to influence the upcoming 2025 fall elections.
Al-Sudani—referred to as 'Engineer,' a title prominently displayed on project billboards throughout Baghdad—has signed or overseen multi-billion-dollar megaprojects. These include a contract with Siemens Energy to boost national power generation by 11,000 MWh, followed by a five-year agreement between the Iraqi Ministry of Electricity and the U.S.-based GE for a 24,000 MWh production increase. His administration also inked a major deal with TotalEnergies to upgrade the country's energy infrastructure and establish a large-scale solar power plant. It also launched the fifth-plus and sixth rounds of oil and gas field development contracts after a long pause. The Ministry of Petroleum also signed a new contract with British oil giant BP to develop Kirkuk's oil fields. While these megaprojects could yield key improvements in public services, a range of domestic, regional, and international challenges has significantly limited their scale or delayed results.
As the country heads into the scorching summer months from July to September, reports indicate that water reserves at dams have dropped to a historic low—just 5 billion cubic meters as of April 2025, compared to 60 billion cubic meters in 2020. The state's electricity sector is similarly strained. Despite efforts to expand solar power and natural gas infrastructure, Iraq's electricity supply remains at approximately 27,450 MW, while demand has surged to 48,000 MW—a shortfall of around 20,550 MW, or 42%, according to Al-Sudani's remarks at the Baghdad International Fair.
Although the government has proposed temporary solutions such as importing electricity from Turkey, Saudi Arabia, and Jordan, the deficit continues to fall short of public expectations. The situation may worsen if the U.S. ends sanction waivers that currently allow Iraq to purchase natural gas from Iran—a source that helps generate about 5,500 MW, or roughly 20% of the country's current electricity capacity.
Meanwhile, new political alliances forming ahead of Iraq's elections—even within the ruling 'Coordination Framework'—could pose further challenges to Al-Sudani's re-election bid. With limited prospects for his coalition, other influential Shia parties may exploit the ongoing energy crisis to undermine his position. By capitalizing on public frustration, particularly in Baghdad, they could reignite protests and weaken his chances for a second term.
At the same time, Iran's struggles to maintain its contracted gas supply to Iraq—which currently supports production of around 3,500 MWh—are cause for concern. Further reductions are likely during Iran's own peak summer demand or if the U.S. revokes sanction waivers, forcing Iraq to halt gas imports without reliable alternatives. This is further complicated by recent tensions between Baghdad and Erbil over the Kurdistan Regional Government's (KRG) agreements with WesternZagros and HKN to develop the MIRAN and TOPKHANA oil and gas fields. These deals were announced during the KRG Prime Minister's visit to Washington last week, even as Kurdistan's oil exports remain stalled due to unresolved technical and financial disputes between Baghdad, Erbil, and IOCs in the APIKUR.
Although strengthening energy security was a notable achievement for Al-Sudani's cabinet early in his tenure, the lack of tangible progress and difficulties in executing ambitious plans, as I discussed in my previous article for OilPrice, could jeopardize his prospects of leading the next government after the 2025 Iraqi parliamentary elections.
By Shahriar Sheikhlar for Oilprice.com
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