Future of Iraq's energy sector 'hinges on the outcome' of general election

Future of Iraq's energy sector 'hinges on the outcome' of general election
Energy deals signed by PM Mustafa Al-Kadhimi during his short tenure could be slowed and stifled by a prolonged change in government in Iraq, a market intelligence group has said.
3 min read
12 October, 2021
S&P Global said that without help from international oil companies, Iraq is unlikely to meet its oil producing targets [Getty]

The future of Iraq's energy sector "hinges on the outcome" of Sunday’s general election, and could face months of slow and stifled progress, market intelligence group S&P Global has warned. 

A number of energy deals moving away from crude oil towards gas and renewables were signed during the tenure of Prime Minister Mustafa Al-Kadhimi, who assumed office in May 2020. 

The finalisation of these agreements now rests in the hands of the government which will be formed after the elections.

However, it may take months to agree on a new government and this could obstruct the implementation of an eventual deal, reported S&P Global. 

"Any progress in Iraq's oil sector and the finalisation of numerous key deals with international oil companies signed during the one-and-a-half-year tenure of Mustafa Al-Kadhimi's government will hinge on the outcome of the parliamentary elections that took place October 10," S&P Global said on Monday. 

The market intelligence company said that the most high-profile agreement to hang in the balance was a $27 billion deal with TotalEnergies signed in September. Few details have been revealed about the implementation or timeline of the agreement. 

S&P Global also said that without the help of international oil companies, the country would not be able to fulfill its plans to boost production beyond 5 million barrels per day. 

"This disruption is likely to last for several months - whether or not Prime Minister Mustafa al-Kadhimi and parts of his cabinet are reappointed," said Patrick Osgood, a senior Iraq analyst at Global Consultancy Control risk.  

"That so many initial deals were signed before the elections was an attempt to create facts on the ground by the government, and therefore a tacit acknowledgement of the risk that these deals may not survive a shift in power after the elections, should that occur."

However, analysts Renad Mansour and Hayder Al-Shakeri at Chatham House claimed the practice of supporting large-scale infrastructure projects before an election was commonplace among Iraqi's politicians. 

Iraqi politicians have recently over-promised and under-delivered, the Chatham House researchers said, and this is a major reason for widespread popular disillusion with the Iraqi political system

Many Iraqis called for a boycott of Sunday's vote and turnout was the lowest recorded in the five elections since the US invasion in 20o3. 

Mansour and Shakeri said that the purpose of the election was to "legitimise the status quo", not to strengthen democracy or promote reform. 

However, with some candidates already claiming victory and others disputing the election results, it could take months before a government which is able to respond to the needs of the energy sector is in power.