(Bloomberg) -- Iraq is looking to buy cargoes of liquefied natural gas for the first time as it faces uncertainty over supply from Iran, raising the prospect of electricity shortages.
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The country is in broad talks with companies to secure a specialized vessel to use as a floating LNG import terminal, according to people familiar with the matter, who asked not to be named because the discussions were confidential. It includes a plan with a UAE-based firm to bring in both LNG supply and floating terminal, Hamza Abdul Baqi, director general of Iraq’s South Gas Co, said in an interview.
Iraq’s first-ever push to buy LNG comes as the US ended a sanction waiver for electricity imports from Iran amid President Donald Trump’s plans to tighten pressure on Tehran. Baghdad may find it difficult to contract a floating import unit before demand rises in the summer as they usually take over a year to deploy and availability is scarce.
Power purchases from Iran make up a small share of Iraq’s total electricity consumption. Yet Iraq is dependent on Iranian gas to run its generating plants. But supplies have been uneven due to technical and payment issues.
The US move also complicates Iraq’s gas purchases from Iran, and a decline would likely result in more blackouts during summer when temperatures can exceed 45C (113F). Flows have already stopped to power plants in Baghdad and the central Euphrates region for the past two months, electricity ministry spokesman Ahmed Moussa told Iraq news agency INA on Monday. Supply to power plants in southern Iraq has also been unstable, he added.
Iraq has been working on plans to secure fuel from other sources, including setting up floating platforms at Iraqi ports to import as much as 500 million standard cubic feet a day of LNG. The country has said it expects to make this operational before this summer.
The floating LNG import terminal, once installed, could make up about 50% of the gas that Iraq’s was getting from Iran, Abdul Baqi said.
Floating storage regasification units, as the LNG import vessels are called, can take more than a year to install. Even the ones that were rapidly built in Europe following Russia’s invasion of Ukraine in 2022 took months to build. That rush has also caused a shortage in these floating vessels.