Baghdad is in a bind between its ambitious plans and stubborn realities, writes Bachar Halabi
The Iraqi government of prime minister Mohammed Shia al-Sudani is pressing ahead with a string of high-profile gas projects aimed at curbing dependence on Iranian imports, ending its catastrophic flaring problem and freeing up more crude for export. The country's gas processing capacity has risen sharply over the past two years, but these gains are insufficient to overcome a chronic shortfall.
Iraq is pinning the majority of its hopes for transforming its gas sector on a $27bn, multi-pronged development designed to capture gas, expand oil output, generate solar power and secure vital water injection supplies — dubbed the Gas Growth Integrated Project (GGIP). Led by TotalEnergies, the much-delayed scheme was eventually launched in 2023 and is the most ambitious energy investment in Iraq since the US-led invasion 20 years earlier. Its progress is being watched closely as an indicator of Baghdad's ability to turn pledges into performance.
The core of the GGIP is redeveloping Iraq's Ratawi oil field. It aims to more-than triple crude production at the field and make it a flare-free operation through a gas capture facility — the ArtawiGas25 hub — which will eventually have a capacity of 600mn ft³/d (6bn m³/yr). China's CPECC has been contracted to build ArtawiGas25, and the 300mn ft³/d first phase is expected on line early next year. A first 50mn ft³/d unit is due to start up before the end of this year. Turkish energy and construction conglomerate Enka is adding further oil and gas processing capacity at Ratawi through a 163mn ft³/d facility.
TotalEnergies holds a 45pc stake in the non-solar parts of GGIP, followed by Iraqi state-controlled Basrah Oil with 30pc and Qatar's state-owned QatarEnergy with 25pc — highlighting how Iraq has succeeded in attracting a rare combination of western and regional investors.
Further south, Iraq's gas ambitions are being spearheaded by joint venture company Basrah Gas (BGC) — comprising Iraq's South Gas, Shell and Japan's Mitsubishi. BGC's gas processing facility is one of the world's largest flare-reduction projects, after it raised $360mn in 2021 to fund infrastructure that has lifted its processing capacity to 1.4bn ft³/d. BGC is now seeking a $500mn loan from the World Bank's private finance arm, IFC, to expand the facility even further.
Pearl in the desert
In Iraq's semi-autonomous Kurdistan region in the north of the country, Pearl Petroleum — comprising UAE firms Dana Gas and Crescent Petroleum, Austria's OMV, Hungarian company Mol and German utility RWE — is aiming to increase its gas production capacity by more than 50pc to 825mn ft³/d by the end of 2026. Output growth will be driven by an expansion of the Khor Mor gas field to 750mn ft³/d from 500mn ft³/d at present, and development of the Chemchemal field, believed to hold reserves comparable to Khor Mor.
The additional gas from Pearl Petroleum will primarily serve the Kurdistan Regional Government's (KRG) power sector under a 20-year supply deal, but federal Iraq could also benefit. Baghdad has approved plans to offtake around 100mn ft³/d from Khor Mor to supply a 620MW power plant in Kirkuk. If implemented, the deal would displace crude and fuel oil currently burned for power generation and potentially free up more supply for export — Iraq uses 50,000-200,000 b/d of crude in its power stations, depending on the season, Argus estimates show.
But the agreement has been held up by political sensitivities and Tehran's entrenched role as Iraq's dominant gas supplier, with the sway of Iran-aligned factions within Iraq being one of the obstacles standing in the way of Baghdad making an active push to find alternatives to Iranian gas. The revival of US president Donald Trump's "maximum pressure" campaign on Iran and the scare of the 12-day war between Iran and Israel in June has given Baghdad fresh incentive to diversify, with Kurdish gas increasingly viewed as a strategic option.
Iraq receives Iranian gas under a five-year contract for up to 50mn m³/d that was finalised last year, after the expiry of two previous contracts for a combined 58mn m³/d signed in 2013 and 2015. But Iranian supplies have been unstable in recent years, partly as a result of payment issues but also because of rapidly growing gas demand in Iran occasionally squeezing supply available for exports. With domestic demand poised to continue outstripping supply growth in the coming years, Iran would probably redirect supplies to domestic households and industries if Iraq were able to wean itself off Iranian gas. Tehran may also increase supplies to existing customers, such as Turkey and Armenia.
These gas projects combined have the potential to increase Iraqi output by up to 1bn ft³/d in the coming years, up by about a third from current levels. Iraq's federal gas production could rise to 4bn ft³/d by 2032, if projects at Akkas and Mansuriyah and Crescent Petroleum's Round 5 acreage advance alongside associated gas capture, according to a June report by consultancy Wood Mackenzie. More than $5bn of engineering, procurement and construction contracts have been awarded in the past year, 95pc of them to Chinese firms. Baghdad has also signed swap deals with Turkmenistan and is eyeing LNG imports to plug short-term gaps.
But optimism remains measured, at best, as execution risks are high. Infrastructure bottlenecks, limited pipelines, poor power connectivity and long project payback periods weigh heavily on investor interest. Political friction between Baghdad and Erbil continues to cloud the potential integration of Kurdish supplies into federal infrastructure.
Perhaps the sharpest warning against high expectations in Iraq's gas sector comes from satellite data. The Iraqi oil ministry claims the country captured 70pc of associated gas last year, but the World Bank's Global Gas Flaring Tracker shows gas flaring hit a record-high 1.75bn ft³/d in 2024, placing Iraq third-highest globally for gas flaring, after Russia and Iran. Flaring equated to roughly half of Iraq's gross output, highlighting a stark mismatch between nameplate processing capacity and real utilisation.
Recent inaugurations — including BGC's BNGL 2 unit and Chinese firm UEG's Faihaa plant — increased Iraq's gas processing capacity to 2.1bn ft³/d last year, up from 1.3bn ft³/d in 2023. Yet the gains in flaring reduction were marginal, with utilisation at BGC hampered by feedstock shortfalls and delays at other facilities. Success was more tangible at the Halfaya oil field in eastern Iraq, with flared volumes reducing by half after state-controlled PetroChina brought a 300mn ft³/d plant on line in June last year.
Between ambition and reality
Iraq, under al-Sudani, remains steadfast in its strategy. It aims to develop domestic gas, wean itself off reliance on Iranian gas imports, and redirect crude from power generation to exports. Progress is visible in project launches, financing gains and rising LPG exports. But the gap between capacity additions and effective utilisation persists, undercutting official claims of rapid progress.
Unless Baghdad can align upstream incentives, improve its ability to monitor flaring accurately and co-ordinate midstream investments, Iraq risks repeating a familiar cycle — announcing capacity expansions while remaining one of the world's largest gas flarers. For now, the country's gas story is one of ambition colliding with hard realities on the ground. More importantly, parliamentary elections scheduled for November are not just important for the country's political landscape, but are also expected to shape the energy sector's trajectory moving forward.
