NIGC Keen on Renewing Gas Export Contract With Iraq

EghtesadOnline: The National Iranian Gas Company is ready to renew its gas export contract with Iraq.

News ID: ۷۸۷۰۹۳

02 October 2021

Majid Chegeni, the managing director of state-owned company, made the statement in a meeting with visiting high-ranking Iraqi energy officials in Tehran on Thursday, IRNA reported.

“Apart from our deep-rooted cultural and religious relations, we have strategic links with Iraq and strengthening energy ties with the Arab neighbor is of great importance,” he said.

“NIGC expects Iraq to be committed to its previous deals and settle its unpaid debts as soon as possible. We are willing to negotiate the terms of a new deal whenever the Iraqi energy officials are ready.”

The previous contract will expire in February 2022.

The first gas export agreement between the two neighbors was signed in 2017, based on which NIGC was obliged to deliver 10 million cubic meters of gas to thermal power plants in Baghdad.

The volume increased by 25 mcm/d in 2019, when Iran decided to supply gas to Basra’s power stations.

Over the last three years, Baghdad has been unwilling to pay back its massive debts and blames sanctions and banking restrictions reimposed on Iran by the US (since 2018), which has made it near impossible to transfer money through normal financial channels.

According to Mohammad Reza Joulaei, the head of NIGC’s Dispatching Department, Iran reduced natural gas exports to Iraq by 15% in September.

“The reduction in gas exports has nothing to do with Iraq’s unsettled debts to NIGC,” he said.

“Although Iraq’s debt to NIGC has surpassed $5 billion, the recent export cut, expected to continue for six months, is based on the terms of an agreement signed with the Arab neighbor in 2020.

The official noted that Iraq received close to 35 million cubic meters of gas from Iran daily till August 15, but NIGC’s daily export since then reduced to 30 mcm and this will continue over the next six months.

“Although plans had been made to help Iraq settle its massive debts through monthly installments, the war-ravaged country has fallen short of clearing its debts,” he said.

Iraq has lost 2.6 gigawatts of power generation due to lower Iranian gas imports, the Iraqi Electricity Ministry said on Sept. 1, as OPEC's second-biggest producer continues to suffer from intermittent energy supplies from Tehran.

“Iranian electricity exports to Iraq have also been suspended due to domestic power shortages,” Mostafa Rajabi Mashhadi, the spokesman of Iran Power Generation, Distribution and Transmission Company, was quoted as saying by IRNA.

In 2020, Iran exported around 2 GW of electricity, but that volume has dropped this year to 150 megawatts due to domestic needs, he added.

Iran’s intermittent supply of gas and electricity has led to widespread shortages in Iraq this summer, when the temperature soared to 50 degrees Celsius, especially in the south.

Adding to Iran's outage is the difficulty faced by the cash-strapped and politically-hobbled Iraq in paying billions of dollars of dues to Tehran.