FLY over southern Iraq at night and you get a glimpse of the dire state of the country’s electricity. The brightest lights shine not from skyscrapers or roads, as they do in nearby Kuwait City, but from oilfields, where flares burn useless gas extracted with the crude. Iraq wastes about 12 billion cubic metres a year of gas this way—more than Austria’s entire consumption. Yet Iraq, outside is autonomous Kurdish region, cannot guarantee its people a reliable electricity supply for a whole day. While the flaring goes on, Iraq imports gas from neighbouring Iran at high European prices and electricity from Turkish barges in the Gulf. Many Iraqis run their own generators, which account for 8% of the country’s total electricity supply and can cost a family as much as $1,000 a month—a sixth of average annual income.

After decades of sanctions and war that ruined Iraq’s network, things are getting better, but the country’s capacity of 13 Gigawatts (nearly a third from Kurdistan) is still a quarter short of demand, well shy of the 42 Gigawatts Iraq will need by 2030. This makes life miserable for many Iraqis, especially in the summer heat, and hurts industrial development. Hussein Shahristani, a deputy prime minister with oversight of the country’s energy, says the shortages cost Iraq $40 billion a year.

Using the flared gas would help. As Iraq’s oil output climbs in the coming years—ultimately to 9m barrels a day, three times the current figure, if government plans are fulfilled—production of gas from the same fields will soar. Basra Gas Company (BGC), a joint venture involving Shell, Mitsubishi and the state-owned South Gas Company, has a contract to capture much of it to feed Iraqi power plants. But the deal has annoyed many in Iraq’s energy sector, who say it gives the foreign firms a near-monopoly of the country’s gas. BGG’s contract also allows for liquefied natural gas shipments to Asia’s lucrative markets once local demand has been met—another source of rancour.

Nor has the gas programme moved as swiftly as some would like. The government wants flaring to stop by 2015. But three of the projects are producing 1.1 billion cubic feet a day now. BGC captures 400m of this already and says its capacity will reach 1 billion by 2016. By then, though, the projects will be producing even more oil and so even more gas. Understandably, not all of the companies operating oilfields in the south are thrilled to adjust their oil plans so a rival can install gas-gathering facilities and pipelines.

Iraq must also build new power plants, persuading private foreign firms to invest in them. Yet a large tender for four independent power producers fell through in 2011. Two smaller deals were approved recently and Iraq’s government has talked of tendering for more. But the lack of a clear investment framework and contractual provisions for supplying fuel have put off big investors, says George Sarraf, a partner at Booz & Company, which helped the government design a long-term energy plan.

Without private capital, the ministry of electricity will have to fund an estimated $140 billion that needs to be spent on Iraq’s power supply by 2035. Oil revenue would pay for that many times over. But Iraq’s institutions are not yet capable of handling multiple projects, says Mr Sarraf. Many engineers fled the country or were “deBaathified” after the American invasion of 2003.

(Photo credit: AFP)