On September 14, the Oil and Energy Committee in the Iraqi Parliament published a report prepared by the advisers in the Prime Minister's Office, stating that Iraq is losing annually around $ 40 billion due to the chronic crisis of power outages. The report confirms that frequent power outages have caused serious damage to petrochemical plants and private factories. For years now, there have been power outages that may last up to 20 hours a day throughout the year, with the exception of the Kurdistan region, where the private sector is involved in electricity generation and distribution. True, power outages have become part of the lives of citizens, but their long-term repercussions go beyond material losses. For one thing, chronic power outages mean that people have to rely on generators in their homes and neighborhoods, which generate pollution. Another consequence is damage to household electrical appliances, such as refrigerators, computers, and television sets, as a result of repeated sudden interruptions in electric supply. These losses might be borne by citizens and not the state as a whole, but they are still losses for the country, and cannot be underestimated at the personal and material levels. In addition to this, citizens pay hundreds of dollars to operate and maintain generators, aside from electricity bills paid to the government. What is the reason behind this miserable situation in the electricity sector in Iraq and other Arab countries? Why is this playing out at this time in particular, rather than in the early stages of electricity use in the Middle East several decades ago, following the Second World War? Are Iraq and other countries undergoing the same tragic experience lacking in the necessary funds to build power stations? Of course not. The main reason is the spread of the culture of corruption and lack of accountability, with corruption widespread among senior officials in the Iraqi government. What is happening in Iraq is that inexperienced companies are being brought in to do the work, causing delays, while local implementation is entrusted to non-specialized government officials. The issue has to do with a comprehensive plan that takes into account several factors, including: annual consumption growth; the most cost-effective fuel using what is available in the country concerned; the use of alternatives from solar to wind to buttress electric power supply; the possibility of electrical interconnection with neighboring countries, as is happening in the region at the initiative of the Arab Fund for Economic and Social Development; the environmental impact of the alternatives used; the possibility of cooperation with the private sector to invest in the electricity generation sector, provided that the companies that win tenders are not owned by relatives of officials and their friends or that they lack the necessary experience; and studying the pricing of electricity in a way help rationalize consumption without damaging the poorer classes. This is not new, and there are many global studies in this area. The electricity crisis is one of the crises of the Iraqi energy sector. But there are myriad other problems, including the emergence of two divergent oil industries in the country since 2003, one belonging to the federal state and another one to the Kurdistan Regional Government (KRG). Disputes between the two sides are growing, and are expected to escalate further, politically and over petroleum, if the KRG begins exporting oil directly to Turkey without the consent of the federal government, in clear violation of the constitution. Meanwhile, the ambitious plan to produce 12.5 million barrels per day by 2017 faces many obstacles, which had been predicted by many Iraqi oil experts. So the question is: Why is there such haste to increase production in such a short time? As is known, Iraq has huge oil reserves that put it in the ranks of the top five oil countries worldwide. It is important for Iraq to develop its discovered fields, and push forward its exploration programs to find new ones. But Iraq was delayed in the past decades as a result of wars and the international embargo. It is now known that implementing this difficult petroleum plan in a very short time has to do with the attempt to support the public budget with the greatest possible amount of oil revenues to serve shortsighted political commitments, including hiring a huge number of employees for government jobs, regardless of whether they are needed or not, not to mention providing the necessary funds for officials to buy the allegiance of the people. The collapse of oil prices at the end of the last decade scared officials in the government over the prospect of having a large deficit in the budget, threatening to reduce the amount of money available to them to act with it as they pleased without oversight or accountability. As a result, there was a growing urgency for petroleum authorities to increase production, to offset any budget deficit. In light of these facts, Iraq contracted international oil companies to develop its fields. We do not intend here to criticize cooperation with international companies. Indeed, with the collapse of government institutions and the migration of large numbers of Iraqi oil industry experts, it has become necessary to cooperate with international companies. But Iraq should have ensured a proactive role for the Iraqi National Oil Company in overseeing the international companies' execution of contracts according to what has been agreed upon, and secure an opportunity to train a new generation of Iraqi experts. The problem lies in the goals that have been specified, namely, to increase production from 2 to 3 million barrels per day, to about 12.5 million barrels per day in less than a decade, in a country that is lacking in political stability and that remains on the verge of civil war. Ultimately, successfully producing 12.5 million barrels per day within a short period of time means that markets will be oversaturated with oil supplies, leading to intense competition with other producers within OPEC and beyond. In turn, this could mean having to give discounts and receive fewer revenues than expected, which contradicts with the primary objective of this oil policy. * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
