Iraq and Iran reach deal on gas supply, says Al Sudani

Move will end the crisis of gas supply needed to run electricity plants

The Rumaylah oilfield near Iraq's southern port city of Basra. AFP

Iraq’s Prime Minister Mohammed Shia Al Sudani said on Tuesday that an agreement had been reached to supply Iran with crude oil in exchange for gas.

The move will end the crisis of gas supply that is needed to run electricity plants in Iraq, Mr Al Sudani said in a televised speech.

“The supply of Iranian gas has resumed and the quantities will increase, starting this evening as 10 million standard cubic metres will flow, and they will return to the same previous quantities,” he said.

He said the gas supplies from Iran were halted in the past and decreased by more than 50 per cent due to lack of US approval to transfer funds to Tehran.

Mr Al Sudani added that Iraq has settled a debt of $11 billion to Iran.

Ahmed Mousa, a spokesman for the Iraqi Electricity Ministry, said the agreement would secure the payments for Iranian gas.

The flows of gas will increase gradually, Mr Mousa said.

On Monday, Iraq signed a major deal with French oil company TotalEnergies that included plans to capture gas from oilfields in the southern Basra region.

In June, Iraq invited foreign companies to bid for contracts to explore and develop natural gas reserves in 11 new blocks.

Iraq has been facing a severe energy crisis for years due to political instability, a lack of investment in energy infrastructure and a generous subsidy system that means the cost of electricity is virtually free for Iraqis, further undercutting the ability of the government to cover the cost of production.

This has resulted in massive power shortages, leading to widespread cuts and regular protests, particularly during summer.

The country is also rich in oil and natural gas reserves, but has struggled to capture gas associated with oil production, instead burning off or “flaring” vast amounts.

The US has pressured Iraq to reduce its dependence on Iranian gas imports and seek alternative energy sources, including solar energy, but also capturing gas that would otherwise be flared.