Power cuts plague Iraq, hurt oil production

Power cuts plague Iraq, hurt oil production

By Ross Colvin

BAGHDAD, Jan 18 (Reuters) - Electricity cuts that blacked out Iraq's northern oilfields and main refinery this week were a timely reminder that its hopes of boosting oil production rest on something it does not have -- a dependable power supply.

Iraq has managed to sustain production of around 2.2 million barrels per day (bpd), but levels were close to 3 million bpd before the U.S.-led war on Iraq in March 2003.

While sabotage attacks have constantly interrupted the country's attempts to increase oil production, power cuts are nearly as detrimental.

The latest major disruption was on Wednesday, when Iraq's largest refinery at Baiji, 180 km (110 miles) north of Baghdad, was shut down by a power cut.

Iraq has also stopped pumping crude oil from its northern Kirkuk oilfields to the Turkish port of Ceyhan after the main power station feeding the fields ran out of refined fuel.

Baiji resumed operations on Thursday evening, but the Kirkuk oilfields were still idle on Friday, according to an engineer in Kirkuk, speaking to Reuters on condition of anonymity.

Iraq's Oil Ministry has blamed the Electricity Ministry for failing to provide its refineries with an uninterrupted power supply. The Electricity Ministry in turn has said the Oil Ministry is not providing sufficient fuel to run its plants.

"It's a vicious circle," observed a U.S. government official, who said U.S. officials were working hard to improve cooperation between the two ministries to improve the stability and capacity of the fragile, war-damaged national power grid.

The pressure on the country's fragile grid has been increased by an exceptionally cold winter that has left many Iraqis with less than an hour of electricity a day.

The Electricity Ministry has also blamed a decision by Turkish power provider Kartet on Jan. 4 to stop exporting electricity to Iraq. Kartet said Iraq had stopped supplying it with refined fuel for its power station near the border.

"We are going to see blips like this," said the U.S. official, who spoke on condition of anonymity. "We are fully engaged with them (the ministries) to resolve this issue, and it is our belief that this will be resolved soon."

KEEPING LIGHTS SWITCHED ON

Washington has pumped $4 billion into reconstructing the national grid, and the U.S. Army Corps of Engineers has completed more than 500 projects to improve the generation, transmission and distribution of electricity in Iraq.

Iraq needs about 9,500 megawatts a day but Iraqis receive around only 5,000 MW. A 10-year plan announced by Electricity Minister Karim Waheed envisages adding 1,000-1,500 MW, but attracting the necessary investment has not been easy.

"The technical issues involved in re-establishing national grids are extremely complex," said Steve Wardlaw of Baker Botts law firm, which has great expertise in energy.

"Add into that a volatile political situation and a lack of interest from lenders or international power companies ... and it is no surprise that the initially hot topic of the challenge of upgrading the Iraqi power system very quickly fell away through almost complete lack of interest," Wardlaw said.

The U.S. official said giving Iraq a reliable electricity supply was vital for political stability and economic growth. "Who is going to invest if there is no power?" he said.

But Wardlaw said oil companies were used to building their own power stations, particularly in regions like Africa.

As long as they were able to import the equipment and expertise and were comfortable with the security situation in Iraq, "then I think the self-generation of power must be their preferred operation".

Iraq's grid sustained significant damage during the 1991 Gulf War, and the decade of sanctions that followed made repairs next to impossible. In the aftermath of the 2003 invasion of Iraq, saboteurs blew up power lines and oil pipelines.

And trying to keep the lights switched on in Iraq today is a dangerous business. Last August, minister Waheed estimated that 1,100 ministry employees had been killed, kidnapped or wounded.

Rebuilding the grid has also been complicated by a 70 percent increase in demand for electricity from Iraqis, who since 2004, have bought more energy-intensive products like air conditioners, refrigerators and computers.

(Additional reporting by Barbara Lewis in London