Siemens and GE sign agreements for power projects in Iraq

Both companies are competing for contracts in the country

The agreement, which was signed by the Siemens president and chief executive Joe Kaeser and Iraqi electricity minister Qasim Al Fahdawi, follows an earlier presentation of a power rehabilitation roadmShow more

Siemens and General Electric signed preliminary agreements to add 11 and 14 Gigawatts respectively to Iraq’s power infrastructure amid competition for multibillion dollar contracts.

GE said on Sunday its 14GW power capacity plan for Iraq could result in 65,000 direct and indirect jobs, leading to annual savings and recoverable losses of up to $3 billion (Dh11.02bn). The company said it would secure financing for the projects through its relationships with international credit agencies and financial institutions.

Meanwhile Siemens, which had presented a plan for reconstruction of Iraq’s power sector last September, said its 11GW agreement will examine “a series of short-, medium- and long-term plans to meet the reconstruction goals of Iraq and support the country’s economic development”.

The announcements come amid intense speculation that American GE had beaten the German company to secure Iraqi power contracts under pressure from the Trump administration. Both companies are chasing what could be billions of dollars worth of contracts as they begin work to revamp power plants and reduce gas flared from Iraq's southern oilfields.

A World Bank assessment has pegged the cost of rebuilding Iraq at around $150bn, with the utilities sector ranking high on the government’s priority. The dilapidated power network was the main factor that fuelled protests across Iraqi provinces during the summer months, when temperatures can easily reach up to 50° C, occasionally requiring government mandated holidays to cope with the extreme weather.

Both companies were approached by the Iraqi government to help reduce gas flaring, which the oil ministry hopes to tap by 2021. The World Bank estimates around 16 billion cubic metres of gas from the country's fields was flared in 2015, costing the economy billions in lost revenue.

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Gas flaring associated with oil production, particularly from the southern fields, remains a critical challenge for Iraq, which has burnt billions of dollars worth of the fuel due to lack of infrastructure.

The Siemens deal, which was signed by its president and chief executive Joe Kaeser with Iraqi Electricity Minister Qasim Al Fahdawi, follows an earlier presentation of a power rehabilitation road map by the company. Siemens had proposed to add up to 50 per cent of current generating capacity as part of a $15bn plan presented to the federal government in Baghdad.

The company had mapped out a phased overhaul of Iraq’s energy infrastructure, with the first scheme set to affect up to 300,000 people and be completed in three months. Medium to long-term plans for the sector could take 10 to 24 months.

“We are ready to start and look forward to working closely with the Iraqi government to immediately produce noticeable improvements for the Iraqi people,” said Mr Kaeser.

Siemens undertook a 12-month study to gauge a viable redevelopment plan highlighting provinces in dire need of priority rehabilitation.

“The economic viability of the plan is secured by billions of US dollars in potential fuel savings and revenue generation for the electricity sector, supporting the development of the future Iraq,” the company said in a statement.

GE, on the other hand, said it would bring online approximately 1.5GW of additional power by 2019 through upgrades at existing plant sites, which would be sufficient to supply up to 1.5 million Iraqi homes.

The company would also undertake “maintenance and rehabilitation services” to secure availability of another 7GW currently under operation, it said.

Other plans include upgrading existing power facilities, conversion of simple cycle power plants to combined cycle and developing substations and overhead lines across the country. It would also develop a centralised energy management system that covers generation, transmission and distribution.

In an interview with The National last November, GE unit Baker Hughes said it had added 400 Megawatts to Iraq's power grid by addressing gas flared from the Nassiriya and Al Gharraf fields.