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Cablegate: Maintenance Program Yields Robust Electricity

VZCZCXRO0878
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #1695/01 1561130
ZNR UUUUU ZZH
R 041130Z JUN 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 7659
INFO RUCNRAQ/IRAQ COLLECTIVE
RHEBAAA/USDOE WASHDC

UNCLAS SECTION 01 OF 02 BAGHDAD 001695

SIPDIS

STATE FOR NEA/I AND EEB
USDOE FOR PERSON

E.O. 12958: N/A
TAGS: ECON ENRG IZ PGOV
SUBJECT: MAINTENANCE PROGRAM YIELDS ROBUST ELECTRICITY
GAINS IN 2008 -- BUT WHAT HAPPENS IN 2009?

1. (SBU) SUMMARY: Iraqi electricity output in the first
four months of 2008 outstripped output for the same period of
2007. A year-to-year comparison for the January - April
period shows that overall, the ME experienced a system-wide
increase in electricity output of 20 percent per month. Only
8 percent of the increase is attributable to new gas turbine
plants coming on-line. The balance stems from a seven-month
old USG-funded program for operations, maintenance and
sustainment (OMS) that squeezes more production out of
existing generation assets. Generation plants operating
within the OMS program have increased production by 30
percent per month in the comparative four month period.
However, the OMS program will begin to cease operations on
September 9, unless the GOI (specifically the Ministry of
Electricity) acts now to pick up the costs of the program.
END SUMMARY.

2. (SBU) To reverse the absence of a "culture of
maintenance" in the power sector, the U.S. Mission's Iraq
Transition Assistance Office (ITAO), together with the U.S.
Army Corps of Engineers, Gulf Region Division (GRD)
established the OMS program to introduce modern inspection,
operations and maintenance protocols at six of the ME's major
power plants. Since becoming fully operational, this program
has increased plant production output by 30 percent per
month, and plant availability (which measures the days per
month a plant operates) and reliability (which measures the
hours per day a plant operates) by nearly 20 percent per
month. The cost of this improved capacity is less than 20
percent than the cost of the equivalent amount of electricity
gained by constructing new generation plants.

3. (SBU) This program, however, is in use at only about 45
percent of the ME's current generation plants and the
contracts that implement it will expire on September 9, 2008.
The significant gains of this program argue in favor of the
GOI retaining the existing program and expanding it to the
rest of the ME's generation stations. Yet the ME has taken
no steps either to retain the current contract with its own
funds or to replace it with an equivalent alternative,
despite strong Embassy encouragement. Without this program
the progress made to date will be lost within months, and the
potential for further gains by extending the program to the
remaining plants will remain unrealized or at best be much
delayed.

------------
HOW IT WORKS
------------

4. (SBU) The current 80 million USD OMS program distributes
42 ex-pat engineers and technicians and 60 local national
staff among the six major Iraqi power plants. They work
shoulder-to-shoulder with ME plant operators and other
employees, teaching them best practices in inspection,
operations and maintenance. The goals of the program are to
(1) increase production levels and enhance reliability of the
ME's existing generation assets by employing modern
inspection, operation and maintenance processes and
procedures and (2) transfer that knowledge to the Iraqi plant
employees. To date, the contractor (Parsons Brinkerhoff) has
provided over 5000 work-hours of on-the-job-training (OJT) to
ME employees.

5. (SBU) The program also offers extensive classroom
hands-on training at a newly-constructed training facility at
the Baghdad South power plant. The OMS team currently
delivers approximately 2000 man-hours of OJT and classroom
training each month. Over the course of the past year, ME
personnel have increasingly participated in the training. In
the next month or so, the installation of a remote monitoring
system will allow around-the-clock, real time computer
monitoring of most of the ME's gas turbine fleet of
generators and will permit data collection from 12 of the
ME's generation sites.


------------------
MEASURABLE RESULTS
------------------

7. (SBU) Iraq's national power generation network is
supplied from three domestic sources: hydro-electric
generation, which, because of the regional drought, has
declined from 16 percent of the system's total in 2007 to 9
percent in 2008; thermal steam boiler generation, which in
2008 accounts for roughly 44 percent of the system total; and
gas turbine generation, which makes up the remaining 47

BAGHDAD 00001695 002 OF 002


percent.

8. (SBU) The OMS program has targeted only the steam
thermal and gas turbine plants and has been fairly evenly
distributed between the two technologies. Among the 6 power
plants that participate in the program, there are nine
generation stations: five gas turbine stations and four
thermal stations. Together these units generate 3,050 MW of
running capacity.

9. (SBU) A way to measure the OMS program's value is to
compare its production results to the output levels of plants
that operate without benefit of the program by generation
technology. In total, the OMS plants have increased average
output by 30 percent on a month-to-month basis for the first
four months of 2008 over the comparable period in 2007. In
that same time frame, plants not employing the OMS program
have increased output 10.5 percent per month; most of that
increase is attributable to new gas turbine generation coming
on line.

10. (SBU) Among the steam thermal plants, OMS program
plants experienced a month-to-month average 26.5 percent
increase in the first four months of 2008 over 2007. The
ME's non-OMS thermal plants only increased output by a
monthly average for the period of 2.25 percent. Comparative
results among the gas turbines was less dramatic, but still
favored the plants operating under the OMS protocols. OMS
gas turbine plant increased production output of 32 percent
per month for the period, while non-OMS gas turbine plant
increased output a monthly average of 20.5 percent. Apart
from output increases, the OMS program also improved the
availability and reliability of generation plant - which
means the OMS plants have experienced fewer outages - by an
average of 17 percent over the four-month period.

-------
COMMENT
-------
11. (SBU) The program's current contract expires on
September 9, 2008. There is a six-month option to extend,
but no USG funds to apply to it. We have pressed the ME to
explore extending and expanding this program, but as yet, the
ME has taken no steps to do so. Following a June 1 meeting
with CG Petraeus, however, the ME agreed for the first time
to receive a detailed briefing on various possible options,
which we will provide.


12. (SBU) Clearly, the OMS program has proved a measurable
success. Our recommendation to the GOI is that, at minimum,
it retain the current program and ideally, expand it to the
rest of the ME's network. After just a few short months the
OMS program is adding an additional 500,000 MWHrs per month
to the grid at an all-in cost of approximately $160 per MWHr.
By contrast, a new power plant would take years to construct
at a ballpark cost of some $1000 per MWHr, excluding fuel and
other operating costs. For now, the OMS program is essential
to keep electricity numbers up, and to extend the useful life
of these generation plants. We believe a GOI decision to
expand the OMS program to the other half of the ME's
generation base would extract more electricity from existing
resources quickly and cheaply to further enhance supply. New
generating plants need to be constructed as soon as possible,
but the GOI needs the gains from this OMS program in the
interim. These gains will dissipate in a relatively short
time if the current OMS contract expires and there have been
no GOI arrangements made to extend or replace it with an
equivalent alternative.
BUTENIS

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