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Cablegate: Usaid/Iraq Helps Capture $1 Billion Per Year

VZCZCXRO4888
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3002/01 2611458
ZNR UUUUU ZZH
R 171458Z SEP 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 9465
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 003002

AIDAC
SIPDIS

E.O. 12958: N/A
TAGS: EAID PGOV PREL ECON SOCI PINS SNAR ENRG
EPET, IZ

SUBJECT: USAID/IRAQ HELPS CAPTURE $1 BILLION PER YEAR
FLARE GAS FOR POWER PLANT FUEL

1. BEGIN SUMMARY: With elections approaching and
essential services still lagging, improved service
delivery of electricity is critical. Yet every day
Iraq's southern oil fields burn off gas associated with
oil production, gas that could drive 3,500 megawatts
(MW) of generator power worth $9 billion USD per year.
With USAID's assistance, Iraq is setting the groundwork to
capture a portion of this wasted gas. Ultimately, this
will occur when Iraq commissions a long-delayed new gas
gathering and treatment plant in Basra. END SUMMARY.

--------------------------------------------- -
BACKGROUND ON THE PROBLEM
--------------------------------------------- -
2. With falling temperatures and anxious Iraqis setting
their eyes on the upcoming elections, improved electricity
delivery continues to be a primary political motivator
in Iraq. In the southern area of Iraq, an estimated 800
million standard cubic feet per day (scf/d) of gas
associated with oil production is flared to the atmosphere
instead of being captured for economic use. If available
for power generation, this gas could drive generators
that produce up to 3,500 Megawatts (MW) of electric power
for the Iraqi power grid. Today, the Iraqi grid provides
roughly 5,000 Megawatts in total. This amount is equal
to half of the national demand. Gas is a preferred fuel
for power generation in the many gas turbines Iraq has
deployed over diesel, crude oil or refinery residual
heavy fuel oil (HFO) due to its clean burning
characteristics which greatly reduces maintenance and
decreases downtime and enables increased gas turbine unit
outputs. All U.S. agencies are therefore interested to
provide assistance to the GOI to capture this flare gas
in every way possible.

--------------------------------------------- -
MINISTRY REQUEST FOR HELP
--------------------------------------------- -
3. The Ministry of Oil's State Company for Oil Projects
asked USAID for help at the Zubair Oil Field in Basra,
classified in the industry as a "giant field" because it
contains over five billion barrels of producible oil.
The ministry completed construction of a new gas-gathering
plant in 2003, however, the international contractor fled before
starting up the plant due to security issues. Since then,
the ministry has not been able to gain access to the new
plant's control system computers nor has it been able to
start up the new plant. As a result, the plant remains idle.
Meanwhile, 100 million standard cubic feet of associated
gas continues to be flared into the atmosphere.

--------------------------------------------- -
INITATIVE
--------------------------------------------- -
4. At the request of the Iraqi Ministry, USAID,
under its Capacity-Building Program (known as
Tatweer in Iraq, Arabic for "development"), agreed to
take on removing this initial roadblock to the gathering
of the flared associated gas in Zubair. Working with
ministry engineers, USAID experts tracked down the
company that designed the control systems. USAID
assisted the ministry in obtaining from the design company
the codes and procedures, which will facilitate the
commissioning of the plant. With this information,
ministry engineers in Basra now have successfully turned
on all the related digital equipment in the facility
and the plant can be made ready for commissioning.

--------------------------------------------- -
A FLY IN THE OINTMENT
--------------------------------------------- -
5. The ministry requested further USAID assistance
to obtain training and startup support from the
vendor of the control consoles. This is not an easy
task, since the training simulators are in Dubai where
visas are unavailable for Iraqis. Meanwhile,
the vendor is unwilling to send representatives to Iraq
to train staff and provide plant startup support in
country. USAID is working with the ministry to overcome
these further obstacles. A training simulator will be
moved to Turkey and on-line remote monitored by vendor
engineers will be provided for the initial operation
period. The ministry is now reviewing a proposal from
the vendor to provide these training and start-up
assistance services, and a solution is at hand. This was
a practical opportunity for USAID to interact with the
ministry in problem-solving techniques using this as a
case study. While the ministry has now solved this
immediate problem, it has also gained experience at

BAGHDAD 00003002 002 OF 002


detecting problems and finding alternative solutions.
This experiential learning and doing approach is one
component of USAID's efforts to make the ministries self-
diagnosing and self-sustaining.

--------------------------------------------- -
TANGIBLE RESULTS
--------------------------------------------- -
6. After years of delay in commissioning the Zubair Gas
Plant and its attendant loss of a precious resource,
the GOI requested USAID's help, and is now
preparing to commission the plant for the production
of liquefied petroleum gas and fuel gas. When this
happens, this will contribute to a proportionate
reduction in the need for crude oil and imported
diesel for power generation and increase the
production of liquefied petroleum gas, an expensive
product currently being imported. It will also reduce
environmental impacts due to the elimination of current
flare burning as the gas is diverted into use to displace
heavier fuels. The captured gas at Zubair is valued at
$1 billion per year. While electricity remains a
challenge in Iraq, this is an important measurable step
forward for the Electricity Ministry and for the Iraqi
people. It also reflects on the entree the U.S. Mission
has with the ministries and how USG capacity-building
assistance efforts are poised to produce measurable
impacts.


CROCKER

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