Basra negotiates Iran gas pipeline


Basra negotiates Iran gas pipeline
Demonstrators in Basra protest the govermnet's failure to provide basic services. Without reliable electricity, many Basrawis must endure summer heat that rises above 120 degrees Fahrenheit without air conditioning. (ATEF HASSAN/Reuters)

Published Wednesday, October 16th, 2013

BASRA - Basra province is negotiating a bilateral deal with Iran to build a pipeline and supply gas to three new power plants – an initiative which has apparently not been approved by Iraq's central government and could conflict with UN sanctions.

"This pipeline will be completed before the beginning of next summer," said Basra Governor Majid Nasrawi.

Last week Nasrawi hosted a delegation from Iran and signed a Heads of Agreement for the Iranian company Sanam Industrial Group to build the pipeline and transport gas to power plants, according to Ragheed al-Hajji, a spokesperson for Basra province.

Although Iraq's central government has sought to make Iraq self-sufficient on its own massive natural gas reserves – and has fought provinces' attempts to strike independent energy deals – authorities in Baghdad declined to voice any challenge to the arrangement.

The deal seems especially fraught because Sanam Industrial Group is named in UN Security Council resolution 1747 as an entity "involved in nuclear or ballistic missile activities." UN sanctions call for a worldwide freeze on the company's assets and property. Hajji confirmed the full name of the company, but said he was unaware of UN sanctions.

Hajji said the deal started to come together during Nasrawi's August visit to Iran's Khuzestan province. It is due to be finalized after the Eid holiday.

It's unclear the extent to which Baghdad supports the project, or was involved in the negotiations. The deal received little fanfare, and was not publicized by the normal government entities that have sought media attention when signing previous energy deals – including a different pipeline deal signed by federal Iraqi officials with Iran, to supply gas to power plants in Diyala and Baghdad provinces.

When asked about the new Basra pipeline deal, however, Oil Ministry spokesperson Assem Jihad said, "It was not with the Oil Ministry." He referred questions to the Electricity Ministry.

Electricity Ministry spokesperson Musaab Mudaris said, "It is the Basra local government that did the deal to provide the gas to Najibiyah, Shatt al-Basra and al-Haritha power plants…. We were not a part in this deal."

A senior Oil Ministry official, speaking on the condition of anonymity, said the ministry "only helped in the technical issues by sending a technical team to help both sides."

Mutual benefits

The deal appears to carry some benefits for both sides. Iran needs to monetize its natural gas as much as it can as international sanctions take their toll on oil revenue and curtail investment in the oil and gas sectors, while Iraq currently does not process enough gas to meet domestic demand.

Iraq has the world's 11th-largest proven reserves of gas, but production is nowhere close to its potential because of inadequate investment over the past several decades.

"There is still lack of gas in Iraq and there is not enough capacity to provide the power plants until 2017," said Jihad.

The problem of insufficient electricity has been especially acute in Basra, where residents often cannot run their air conditioners even as summer temperatures routinely exceed 120 degrees Fahrenheit. During past heat waves, angry Basrawis have taken to the streets to protest the government's failure to provide adequate services.

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