Reform of the Iraqi State (4)

Reform of the Iraqi State (4)


 d. Louay Al-Khatib *

The energy strategy in the vision of Iraq 2030
discussed the priorities and fundamentals of institutional reform in the energy sector in this session. In this episode, the integrated energy strategy in the vision of Iraq 2030 will be Iraq being a state dependent on crude oil exports mainly to provide more than 95% Federal.
The governments of the Middle East and North Africa have been competing in their 2030 vision to develop their economies and diversify their national income sources. The most prominent of these visions is what the oil and gas producing countries published for the importance of their oil imports and their impact on the supply of public budgets. The economy of most of these countries is still dependent on petrodollars in their income and its future is dominated by global supply and demand markets. And others.
At the beginning of 2017, the Iraqi government initiated a series of meetings with the World Bank to discuss the outline of Iraq Vision 2030 in the hope of achieving this vision in the autumn of this year. According to official statements, the vision aims to transform Iraq's economy from a spending that depends entirely on oil imports to production that supports the financial budget by a very large percentage through an active role of the private sector in all fields contributing to the components of GDP to rise from the current rates of about 37% In the year 2030 about 54-57%. The vision also aims to achieve self-sufficiency in the agricultural and industrial sectors and the adoption of a market economy in development. But the achievement of these goals is conditional on a radical reform of the tax system and the enactment of special laws and the creation of attractive land for investment and attracting foreign and domestic capital without emigration, to develop the energy sector in every way after the development of a national strategy committed by successive governments.
After the launch of rounds of oil and gas licenses (2009 - 2012) to reach oil production exceeding 12 million barrels per day in 2017, and end the burning of gas associated with the year 2015 to invest in the production of electric power and the supply of local industries to self-sufficiency, Because of the lack of professional role at the time and the uniqueness of decision-making, then the Council of Counselors in the Presidency of the Council of Ministers in cooperation with the World Bank to develop a study and vision entitled "National Strategy for Energy in Iraq," and because of conflicting visions between the ministries concerned, especially oil, electricity and industry on the one hand, The Board of Counselors and the World Bank, on the other hand, decided to develop three scenarios to keep pace with development in the sectors of oil, electricity and industry between the years 2012-2030. But the political quotas that governed the ministries of the energy sector hindered the implementation of the strategy and the role of consultants. All this led to the failure of licensing rounds, which reached one third of its objectives and contracted to produce oil after reviewing the contracts and double the operational costs of oil projects, which exceeded seventy billion dollars with the continued burning of gas, which reached twice as much waste (equivalent to the energy supply of more than four Millions of homes) in light of the worsening electricity crisis that forced the Iraqi government to contract with Iran to import gas as well as the import of electricity from Turkish floating stations. All this burdened the federal budget with an annual bill in billions of dollars with the continued import of expensive oil derivatives and the decline of refining capacity of crude oil.
Therefore, it is incumbent on the concerned parties to develop a realistic vision for the Iraq 2030, especially in the sections of the energy file, which successfully succeed vision and lack of vision and lack of future generations. The vision must be accompanied by bold reform steps and solutions that may be the most difficult to take into account the factors of population growth in Iraq, which will exceed 55 million people in 2030 and address the unemployment scourge, which reached 60% among young people that can not be solved by providing government jobs Private sector development and attracting investment.
Here are some suggested solutions to the development of energy strategy:
First, the update of the integrated energy strategy launched by the Board of Counselors in cooperation with the World Bank in 2012, taking into account the factors and variables that led to a fundamental change in the fundamentals of energy markets and supply and demand, especially after the growth of unconventional oil and gas production in the United States and technological development in the areas of renewable energy , Taking into account the production plans and strategic visions of the rest of the producers from within and outside OPEC in dealing with market shares and investment expansion inside and outside their countries in the field of marketing crude oil and petroleum derivatives.
Second: Iraq has huge oil reserves that provide production for a hundred years at current production levels and may reach 300 years, but what matters to us is the next three decades before the demand for crude oil dwindles due to the multiplicity of energy sources, which helped in the emergence of technological progress and low investment costs. Therefore, it is in the interests of Iraq to encourage increased demand for oil to limit the entry of the most expensive production centers, as well as competition of renewable energy sources and delay the process of consumer transition to non-oil sources. Therefore, Iraq needs to adopt a policy to accelerate the increase in production and draw up a marketing plan that adopts multiple export routes and partnerships Strategic partnership with Asian countries, especially China, based on the exchange of interests and giant investments in partnership with global refineries, distribution and warehousing.
Third: Launch a large exploration campaign inviting foreign companies to work with the Iraqi Exploration Company to prepare data for licensing tours. It should also launch license rounds to develop all the fields discovered through a strategic partnership between the national oil companies and international companies provided that 50% of the imports of oil production from the new fields to finance large industrial projects and the establishment of energy cities, especially in Basra, like the city of Jubail Industrial in Saudi Arabia, The remaining 50% of the new field oil imports are earmarked to finance and manage the sovereign wealth fund by a professional body in the field of global investment.
Fourth: Revising the investment laws in the field of liquidation and not including any commercial ratios in their texts limits the freedom of the government during negotiations with investors, with the adoption of legal materials compatible with the role of international markets to attract huge investments and make Iraq a competitor in the field of manufacturing. The price of crude oil at the production well should be priced at the world price for all consumers, with a generous deduction for the local investor not exceeding 20% ​​to encourage investments and industry within Iraq, subsidizing subsidies with subsidized coupons from the general budget for low income families registered with the Social Security Department.
Fifth: To develop a quick plan in cooperation with international companies to eliminate the burning of associated gas within a period not exceeding 24 months, to collect gas and use it as fuel for power plants, which will stop the use of crude oil and derivatives for stations and provide fuel that would cost the state budget billions of dollars. And the operationalization of the Ministry of Electricity to be self-financing with the privatization of 50% of electricity and converted to investment. The administrative bodies of the electricity sector must be separated and made a supervisory, planned and organized authority for electricity throughout the country under the management of the Federal Ministry of Energy without being involved in any of the executive activities such as production, transportation, distribution and collection. These executive tasks shall be entrusted to local governments through private, public or mixed companies. Seventh: The development of targets to serve the population growth of Iraq and fill the domestic demand and competition of regional countries on world markets in 2030, and these need to develop oil production to reach 10 million barrels of oil per day and the production of 10 billion cubic feet of gas per day, and raising electricity to 50 GW, Develop refining capacity to 2 million barrels per day with high efficiency. In petrochemicals, production capacity should not be less than two million tons per year to compete in world markets.
Eighth: Open the door to investment in renewable energy and support its projects to supply electricity networks with 50% of its needs, with the adoption of gas to meet the remaining demand without the dependence of oil or diesel in electricity.
* Academic and fellow at Columbia University, New York


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