Iraq is facing a significant shortage of natural gas while also exploring new markets for its crude oil exports.
Recently, Iraq’s struggles have gained attention, not only due to pressure from OPEC but also because of difficulties in securing natural gas imports. Iraqi Oil Minister Hayyan Abdul Ghani confirmed that negotiations are underway with several companies to secure two floating storage regasification units (FSRUs) by early June. These units are essential to address a natural gas supply gap caused by the expiration of a U.S. waiver that previously allowed Iraq to import Iranian electricity. With the U.S. now pressuring Iran for a nuclear deal, Iraq is seeking alternatives. The two FSRUs are planned for installation near the Khor Al-Zubair port in Basra. Additionally, Iraq has issued a tender for a fixed regasification platform at the Grand Faw port in the south.
At the same time, Iraq is focusing on expanding its crude oil export market, with a new emphasis on Africa. Currently, about 70% of Iraq’s oil exports, which total 3.2 to 3.5 million barrels per day (bpd), go to Asia. Minister Abdul Ghani highlighted that Africa is becoming an important new market for Iraq’s oil. The country is also increasing its production capacity, supported by 44 new contracts across 14 provinces.
Iraq’s Deputy Oil Minister Basim Khudair recently announced that the country aims to raise its crude oil production to over 6 million bpd by 2028 or 2029. This goal includes a new agreement with BP to develop key oil fields in Kirkuk. At present, Iraq’s production stands at approximately 4.4 million bpd. Alongside efforts to expand into Africa, Iraq is continuing talks with Turkey and the Kurdish Regional Government (KRG) to resume crude oil exports through Turkey’s Ceyhan port. Iraq aims to export around 350,000 bpd via the Iraq-Turkey pipeline, but internal disputes are still unresolved. Although Iraq’s government and parliament have agreed to resume KRG-produced exports, Iraq has not yet recognized international contracts signed between the KRG and foreign operators.
In addition to its oil efforts, Iraq is in advanced talks to import liquefied natural gas (LNG) from Algeria to feed its new FSRUs. Reports suggest that a deal with Algeria could be finalized within two months, providing Iraq with 1 million tons of LNG annually under a medium-term contract. This agreement could offer a critical boost as Iraq prepares for the energy demands of summer and winter.
Despite these steps to diversify its energy sources, Iraq’s LNG imports are contingent on completing the regasification infrastructure at Khor Al-Zubair. The installation of an FSRU connected to the national grid via a 40-kilometer pipeline is expected to be completed by August, marking a key milestone in easing Iraq’s power sector challenges.
The situation has been further complicated by the U.S. revoking a sanctions waiver that allowed Iraq to import Iranian gas. Although Iraqi officials claim the waiver is still in place, reports indicate that the exemption for electricity imports has been removed. This change is a major concern, as approximately 43% of Iraq’s electricity production depends on Iranian natural gas.
In response, Iraq is fast-tracking its 2030 net-zero gas flaring initiative and inviting investment from Western and Asian firms in domestic gas projects. However, despite multibillion-dollar deals with BP and several Chinese companies, these projects are unlikely to resolve Iraq’s immediate energy issues.
Alongside discussions with Algeria, Iraq is exploring LNG agreements with Qatar and plans to increase electricity imports from Turkey. A gas supply agreement with Turkmenistan, signed in October 2024, will provide Iraq with 20 million cubic meters of gas daily.
As Iraq navigates these complex energy challenges, securing diverse gas sources is crucial for maintaining economic stability and meeting domestic power needs.
In a surprising development, Oil Minister Abdul Ghani revealed that Iran has been using forged Iraqi documents to smuggle oil. He explained that U.S. naval forces had detained tankers in the Gulf carrying Iraqi shipping manifests, only to discover that the tankers were Iranian and using counterfeit Iraqi documents. This revelation comes amid reports of a sophisticated fuel oil smuggling network believed to generate at least $1 billion annually for Iran, much of which is tied to Iraq. Abdul Ghani reassured that Iraq’s state oil marketer, SOMO, does not supply to trading companies and suggested that several traders are involved in the smuggling operation.
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