Iraq Seeks to Reduce Iranian Dependence on Energy

Last week, Iraq announced that they are holding a fifth bidding round for exploration and development of natural gas fields in the province of Diyala. Located in eastern Iraq, the fields of Diyala are expected to produce more than 750 million cubic feet of natural gas within the next three years.  This latest round of bidding for the country’s underdeveloped fields comes at a time where the United States has pressured the country to reduce its dependence on gas imports from Iran.

Although Iraq is OPEC’s second largest member producer after Saudi Arabia, they lack the capacity to process their own natural gas and rely on the process of flaring.  Flaring is the burning of natural gas that cannot be processed or sold and producers often rid of the gas, so they do not have to stop pumping crude oil. Iraq lacks the pipeline infrastructure to transport their natural gas they are forced to burn potential revenues, and depend on their neighbor Iran to import natural gas to generate electricity for major Iraqi power plants.

To complicate matters further for Iraq, the sanctions the United States have placed on Iran’s energy sector may force Iraq to stop their energy imports entirely from Iran. As of yesterday, Iran is unable to use or transfer five billion dollars in revenue they have received from Iraq for supplying energy due to U.S. sanctions.  This latest development from the Middle East will be intriguing as Iraq seeks solutions to reduce their energy dependence from Iran.

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