‘We Have Very Little Time’: MEES Sits Down With Iraq’s Electricity Minister

Iraq’s Electricity Minister Luay al-Khatteeb tells MEES* of the extensive challenges – both technical and political – that Iraq’s new government faces as it desperately tries to reform the country’s war-stricken power sector.

Q: Fixing the power sector is no doubt central to Iraq’s long-term stability. You’ve now had a few months with the electricity portfolio, how would you describe the state of the sector?

A: First of all, welcome to our headquarters. It is always a pleasure to meet MEES. As you may know, the sector has been through a series of developments since [the overthrow of Saddam Hussein in] 2003. Back then, generation was around 3.5GW. It essentially quadrupled in capacity terms over the [subsequent] years. But the war with ISIS and the impact of terrorism took their toll on the provinces in the north and northwest. It had a big impact on the national grid and power generation capacity. We lost at least 4.5GW of electricity, and many projects have been stopped resulting in another potential 2.5GW lost.

Q: Which specific projects?

A: There have been so many delays. For example, Anbar province projects – some 1.6GW – are reliant on gas from Akkas gas field in western Iraq where the company [Korea’s Kogas] declared force majeure ( MEES, 20 June 2014 ). The last thing we want to do is build a power station with no fuel supply. Another delayed project in Salahuddin held back 1.2GW.

All these projects require about 18 months to complete, and would then need fuel supply secured. So the instability has really hindered progress – be it the gas supply or the generation itself.

Add to this the destruction to the transmission lines and substations and we are talking about 18% of the country’s capacity. All these need to be developed back from scratch, and this is going to need a couple of years.

Q: And in terms of current available capacity on any given day?

A: As of the day I assumed work [25 October 2018], actual power generation through 2018 had averaged 12GW against demand of 22GW. During the summer months peak, Iraq managed to achieve average generation of 14.5GW; peak demand was 24GW. On a few days generation spiked to 16GW, but you cannot say “Iraq generates 16GW of power.” The highest was on the 20th of September and then it went down.

Q: There are many moving parts - transmission grid losses, the fuel supply issue, and then actual generation capacity. How would you unpack the relationship between these?

A: We have put a development plan forward for 2019 with the focus on [getting capacity online before peak demand in] summer, but this is based on what is available in terms of financial allocation. And given this fact we need to consider all the limitations of processes. We inherited certain practices from our predecessors, legacy issues.

Our plan requires coordination with the oil ministry for securing fuel supply – be it HFO, gas, diesel or crude. We need to coordinate with the water resources ministry for hydropower, as well as with other ministries like finance and planning. We also have the issue of paying salaries and collections procedures. Because at the moment, the yield from this sector [revenue from bill payments] is literally seven percent. We should at least be breaking even to recover what we are spending.

Q: So is this 2019 plan technical, financial, or…?

A: It is technical, financial, but most importantly it is a very, very short-term plan. Our target is to achieve 15% progress compared with 2018 performance. That’s on all sectors: generation, transmission and distribution. Because with demand growth we are talking about 7% per year. Supply growth of 15% is a bare minimum, as that additional 8% is to bridge the gap between supply and demand. The forecasted demand for 2019 is 24GW so we have to make progress towards that.

Q: In some of your previous research you were very critical of the ministry’s demand forecasts. Have those been reevaluated?

A: Yes, I mean, my critiques are more of their assessment of the situation. We are trying to rethink how we should fix this because the last thing we want to do is deliver more of the same. We want to think outside the box and demonstrate real improvement. We need to look into new aspects like investment in parallel to our short-term plan. We need to review our practices and secure that extra 15% margin. We are looking into maintenance procedures, the delegation of power within the ministry, better financial allocations despite the financial constraints imposed on us.

Keep in mind, we experienced a huge cut in budgetary terms – on a budget that was already an austerity budget. Our cut was just over $1bn year-on-year. $400mn in cuts to fuel imports and $600mn on investment. The 2019 budget should have been considered differently by parliament. This should have been a ‘national security budget’. Now the war is behind us. More allocation should have been on electricity and not on defense and so on.

Why is it a national security budget for our ministry? Because no electricity means, no hospitals, no working economy, no nothing. So this is what I have mentioned in my early meetings. Electricity is not a mere service or commodity. It is a national security necessity. And we need to work on it seriously to fix this sector sooner rather than later. Any delay means delaying economic progress in the country.

With regards to the medium and long term, we are also working on adjusting our finances to deliver all our promises over the coming four years for this administration. There are no magic tricks or wonders that will bring radical solutions for summer 2019. Nor will the world end in 2019. Time will move on.

Q: But it’s certainly a threat to the new government… [NB chronic power shortages were central to the collapse of former PM Haidar al-Abadi’s bid for re-election]

A: It is a threat but we need to be frank, candid, and realistic with the people. And that is why we will provide improvements in the numbers [for 2019]. But in terms of providing serious, notable change these will only materialize in 24 months. Why? Because some of the stations and fuel support will come, and transmission solutions will come. But it cannot be fixed in months. It takes time. No matter how much you can mobilize efforts, it cannot happen in months.

Q: At the same time, these hyped-up GE and Siemens deals [ MEES, 26 October 2018 ] were kind of presented as that.

A: With these GE and Siemens deals, we need to distinguish between the fast-track and the roadmaps. The roadmaps are what they signed with the previous administration which are non-binding and for the government to consider.

Q: So for you at this point it is little more than a consideration?

A: It is a consideration of course, but there is no contract. These are things to discuss and consider in terms of how much they can add value.

Q: And so the short-term stuff is being decoupled from the roadmaps?

A: Yes the fast-track stuff is about what they can quickly offer. And we’ve signed many contracts with them on a case-by-case basis. Some will arrive by summer and some by the end of the year. In the media there is quite a bit of hype saying “GE and Siemens will save Iraq.” These roadmaps are yet to be assessed. Any quick solutions, from what I have read, are very much limited in scope. And needless to say, they are not for free. They will come at a cost. And require dollars, of which we are very much limited.

Having said that, even though there are some allocations for loans and financing, the last thing we want to do is sign deals that are overpriced.

Q: Clearly you haven’t had years to look at these roadmaps, but you have assessed them?

A: Put it this way, we need both companies and others to support us.

Q: Have there been talks with any other companies or countries?

A: Yes, yes. We are in discussions with all. But we have said our terms clearly. We are open to deal with countries and companies that can offer us the best products, and the best price, with the best service, with the fastest and best solutions—but all have to be coupled with knowledge and technology transfer.

We want to see partners that are long-term. Not just salesmen from big brands roaming around trying to sell their turbines and equipment, make their commissions and leave. We need serious partners.

Sixteen years on from 2003, companies, especially those dealing in the power sector, have drastically failed to develop a partnership scope with the sector in a way that I could walk around and see a sophisticated maintenance workshop in this country, or R&D workshops to transfer knowledge and contribute to Iraq’s human capital. I haven’t seen this. I’ve just seen salesmen carrying banners of big brands and trying to sell expensive deals.

Q: And would you put the GE and Siemens deals in that category?

A: Of course.

Q: The current roadmaps? Do you think they are doing enough?

A: The roadmaps need to be assessed. I am talking about past practices. They have had chances. Billions have been spent. But these billions did not allocate even a few hundred million toward the partnership.

Q: So what other companies have approached you? You have your demands, have any others come forward?

A: I have been in this job 100 days and I will say 80% of my time has been hijacked answering questions in front of parliament. Including three sessions where I was grilled with hundreds of questions.

Q: It comes with the territory, I suppose.

A: It does. But having said that, we are working on it, and this is the message: I am sure companies will reconsider their way of engaging with Iraq.

We are not just looking into conventional power generation either. We are also looking at solar PV, power generation from waste management, and wind energy as well. We are exploring all avenues and by the end of this year we will have a better picture of the level of interest from companies. But our primary focus is delivering a successful plan for 2019.

Q: Part of this successful plan is undoubtedly electricity and gas imports from Iran, and you last week renewed the import deal. How have the Americans responded?

A: One needs to be realistic. Number one, our vision is not to continue importing electricity and gas. We are a resource-rich country. It is just a matter of time before, with the ministry’s fast tracking, gas development can provide us with the requisite fuel.

Q: Where do you see Iraq’s future gas requirement?

A: So far for example, we are importing 750mn cfd from Iran. Demand is also growing obviously, so we need a lot of gas. We currently need a minimum of 3bn cfd if we are to solely rely on gas and maximize exports of liquids. But by 2030, electricity demand will double to 45-50GW.

We need to manage that mix and renewables will be part of that. We aim to develop 500MW per year of renewables, so 2GW by the end of this government [in 2022]. We are abolishing the feed-in tariff, so that means a lower cost of energy for renewables.

Q: And when would there be a renewable energy bid round?

A: We are already talking to the IFC, to the World Bank, to put a commercial framework in place.

Q: By when?

A: Hopefully we will have firms inviting their proposals very soon. The most difficult 100MW will be the first 100MW as this will set a benchmark. The markets we are comparing to are countries like Egypt and Jordan.

Q: Speaking of Jordan, what is the thinking behind the recent MOU to connect the electricity grids signed a couple weeks ago?

A: This is part of the plan for interconnectivity with neighboring countries, including the GCC ( MEES, 25 January ), which would turn Iraq into an electricity hub. Today we are importing, but who knows what the future will hold. The synchronization is not just with Jordan but with all neighbors.

Q: Are there any plans in terms of importing electricity from Saudi Arabia?

A: Of course we are in talks to import from Saudi Arabia, Kuwait, and with Turkey. There is no exclusivity to this.

Q: What is the status of ‘imports’ from the Kurdish region at present?

A: It’s not importing, it’s within one country. They do have idle capacity and they are prepared to sell electricity.

Q: Are there plans to increase that at all?

A: Yes we are in discussion as we talk. We welcome any possibilities of purchasing electricity for other provinces.

Q: Are they any figures for what Baghdad is looking to purchase?

A: 1GW.

Q: And theoretically there is quite a lot of gas in Iraqi Kurdistan to be developed…

A: Yes and we would very much welcome it. To my knowledge there is no issue of purchasing gas from producing fields in the KRI basically to feed our system.

Q: And what are current electricity purchases from there?

A: 1GW is the potential for this year. At the moment there is an agreement between Kirkuk and investors within the KRI to sell 250MW but the supply is only currently 100MW. And we are pushing for different power stations to connect 1GW. This will help power generation in Mosul, and therefore economic development. This is part of the 2019 plan.

Q: At the Kuwait donor conference last year, $30+bn was pledged with good sum earmarked for the power sector. Is any of that going to go toward your plans at the ministry?

A: It is very limited, if anything for electricity. I did not see any of this in the budget allocation. The way I see it is in terms of the reconstruction of Iraq. I think there is a moral obligation on those countries – especially the GCC – to really support Iraq, and I do not say “help” Iraq. Iraq was really the frontline in the war against ISIS compared to the rest of the Arabian peninsula. Iraqis have sacrificed their lives to defend not only Iraq but the whole of the region from having this terrorism spill over and have the war lost to terrorism. The catastrophe would be unimaginable, especially on energy-producing countries and global markets.

So Iraqis are not asking for help. They are asking for global recognition. This is what we have done. That was a transnational group that we fought and defeated, and we expect the international community to be part of the continuation of the final chapter of the battle: we took care of the battle you take care of the reconstruction. To hold Iraqis accountable to pay for all of the reconstruction is wrong. It should be completely paid back by the international community, and specifically the Middle Eastern countries.

To tell you the truth, tens of thousands of Iraqis died in this war. Tens of thousands suffered serious injuries to endure for life. Hundreds of thousands of internally displaced peoples. The rebuilding of Iraq is an international responsibility.

Q: And you think they’ve let Iraq down so far?

A: I think they are ignoring this moral responsibility. They do not want to talk about it, as if this is an ‘Iraqi war’. But I will tell you something: Iraq cannot afford another episode of what we have experienced, and if it happens things will go wrong so badly and the damage will be quadrupled.

There are many countries which would rather allocate money for air bombings and campaigns but would not give a fraction of that price for rebuilding. I just do not understand the logic. So, as I said, the Iraqis are not asking for help, but for recognition. You write the final chapter as part of your moral responsibility.

Q: What exactly what would you expect for your sector?

A: For the power sector to be completely rebuilt and to turn Iraq’s power sector into a successful entity that would sustain all other industries. And to have all companies affiliated with it to enjoy a vibrant and rewarding market.

We need a good four years of solid, corruption-free work, with proper management, and $20bn to $25bn. And do not hold that sector accountable for the legacy practices. Much was previously spent the wrong way on legacy practices. Going forward there is a need for proper in-country workshops, capacity building programs, training centers, and projects. That would contribute properly to the human capital in our sector.

And when I talk about leadership, I am not talking about a one man show. I am talking about proper teams, managerial staffs and technical capabilities to enjoy full freedom based on the industrial terms. Not to be constrained by muhassasa [sectarian quotas].

Q: In terms of corruption, what does the new ministry intend to do about previously awarded contracts by the last ministry?

A: We are reviewing these processes. For these contracts to be looked at is the business of transparency agencies. For projects on the books right now of course we will look into them for performance. But having said that right now we are looking toward pre-qualification and assessing the practices of new companies. We want to inject new thinking.

Q: But isn’t there much work to be done on legacy corruption?

A: We are working on these things but we are short of resources and short of time. This requires professional capabilities and time. If most of my time is hijacked by…

Q: Journalists?

A: …No, no journalists are the least of my worries and I love engaging with reputable, professional platforms to deliver the reality and be bold about these things. My policy is that as a civil servant I need to be very frank with the people instead of keeping them in the dark. Or selling some clichés that hold little credibility. But meeting and satisfying politicians, and spending less time on the technical and commercial results is the challenge.

For the past 100 days, I could have delivered even more with my team. But we have been slandered in the media by so many individuals and parties, and MPs and so on. Because unfortunately they have either been affected or they look at things from a narrow-minded perspective, as if it is business as usual with a quota system. They do not realize this has to do with national security. If Iraq is not fixed over the next four years, there could be serious civil unrest, threatening not only Iraq but the region.

Q: How are you coping with it?

A: I have said what I had to say in parliament, and many meetings, saying what I have to say whenever these same people drag me through the same questions. So many politicians are ignoring reality or enjoying ‘goldfish memory’ or whatever but we have very little time to play with. We really need to mobilize all our resources and work genuinely and seriously to fix Iraq. Iraq cannot afford to practice more of the same.

*Interview conducted by Waylon Fairbanks in Baghdad 13 February.