Iraq Turns to Domestic Gas for Power Generation after Iranian Supplies Halt

Iraq ramped up its reliance on domestically sourced fuel to generate electricity after supplies of Iranian gas were halted, underscoring Baghdad’s vulnerability to external energy shocks as it prepares for another high-demand summer season.

Power plants across the country are currently operating on local fuel, producing around 18,500 megawatts of electricity, following the suspension of Iranian gas flows, according to Ahmed Moussa, spokesperson for Iraq’s Ministry of Electricity. Speaking to Asharq on the sidelines of the Iraq Energy Conference in Baghdad, Moussa said the disruption stemmed from a combination of financial disputes and Iran’s own seasonal demand pressures.

Tehran is seeking about $1.4 billion in overdue payments from Iraq, Moussa said, noting that the funds are held in a special account at the Trade Bank of Iraq. Gas deliveries from Iran,  supplied via two cross-border pipelines, have been repeatedly disrupted in recent years. In 2023, Iran cut shipments by half over unpaid bills, while Baghdad has cited US sanctions on Iran as a key obstacle to settling payments.

Despite the latest disruption, Iraqi authorities say they are broadly prepared for the upcoming summer, traditionally the most challenging period for the power grid. “Our main concern is imported gas,” Moussa said, adding that progress on regional electricity interconnection projects and new generation capacity provides a degree of reassurance.

Iraq is moving ahead with electricity grid interconnection with Gulf countries, which officials expect to be completed before summer with an initial capacity of 500 megawatts. While modest relative to Iraq’s needs, the link is seen as a strategic step toward diversifying supply sources and reducing dependence on a single external partner.

To expand generation capacity, the Ministry of Electricity has signed a series of large-scale agreements with global energy companies. These include contracts with GE Vernova to add 24,000 megawatts, with Siemens Energy for 15,000 megawatts, and with Shanghai Electric for 11,000 megawatts, according to Moussa.

GE Vernova says it has completed extensive upgrades to its power-generation units in Iraq ahead of the summer peak. Rashid Al-Janabi, the company’s Iraq director, told Asharq that efficiency improvements carried out last year would significantly enhance output and reliability.

GE added 800 megawatts to Iraq’s grid in 2025 and aims to exceed that figure this year, Al-Janabi said. Beyond generation, the company is also working on a strategic transmission project intended to deliver electricity to more than four million homes nationwide. Since 2015, GE has helped secure over $3 billion in financing for Iraqi energy projects, he added.

Siemens Energy has also completed maintenance on its operating units and is “fully ready for the summer of 2026,” said Mahand Al-Saffar, the company’s chief executive in Iraq. He noted that Siemens has identified the sites and fuel volumes required to implement its agreement with the Iraqi government to add 14,000 megawatts of capacity.

In parallel, Siemens is coordinating with Iraq’s oil and electricity ministries to finalise agreements within weeks to harness associated gas from oil fields, particularly in Basra. The project could generate up to 2,000 megawatts, while reducing the environmentally damaging practice of gas flaring.