UK group’s Iraqi joint venture will draw power from a plant whose revenues mostly flow to a Tehran-based company
An Iranian company is the biggest beneficiary of a power plant poised to supply a Shell-backed gas project in Iraq, showing the pervasive presence of Tehran’s business interests in its neighbor and putting the UK group at odds with the West’s shifting geopolitical priorities in the Middle East.
Basrah Gas Company, which is 44 percent-owned by the London-listed energy major, will become a significant power consumer from Rumaila Independent Power Plant in southern Iraq when the gas company’s new facility starts operations in June.
The Rumaila plant is owned by Jordan-based Shamara Holding but was built by Tehran-based Mapna Group, which is entitled to 78 percent of the revenue from electricity sales, according to documents seen by the Financial Times and three people involved in the contracts.
Shell’s joint venture, which has received World Bank funding, has been widely praised for its role in capturing gas that was previously flared at Iraq’s oilfields and processing it for use in local power generation, cooking, or export. Iraq’s state-owned South Gas Company owns 51 percent of the project and Japanese trading house Mitsubishi owns 5 percent.
Shell and Basrah Gas both said they had no dealings with Mapna. There is no indication that payments from Basrah Gas for power from the Rumaila plant, made via Iraq’s Ministry of electricity, will violate US or European sanctions on dealing with Iran.
However, Mapna’s role in the power plant reflects the extent to which companies close to the Iranian regime have become embedded in the fabric of the Iraqi economy.
“Iran’s interests and influence run deep into the Iraqi state and its ministries,” said Renad Mansour, director of the Iraq initiative at Chatham House. “Its long-term investments and networks ensure it remains the most influential foreign power.”
Iran’s reach is especially entrenched in energy, where 20 years after the US-led invasion, chronic under-investment and corruption have left Iraq heavily reliant on imports of Iranian gas and electricity, which provide more than a third of its power needs.
This is not only an issue for Shell. Several international oil companies, including BP and ExxonMobil
, run oilfields in Iraq that pull power from Iraq’s national grid.
Mapna’s construction of the Rumaila plant is perhaps the best example of Iran’s penetration of the sector. It also reflects how the West has vacillated on its rules of engagement with Tehran over the past decade, complicating operations for foreign investors in Iraq.
When Mapna was selected to help build the Rumaila plant in 2015, Iran was about to sign a nuclear deal with Western powers, and relations were improving. Three years later US President Donald Trump pulled out of the deal and reimposed sanctions.
The contract to develop the 3,000-megawatt Rumaila plant was awarded to Shamara in 2014, backed by a power purchase agreement with Iraq’s ministry of Electricity. The company initially hoped to work with a US or European partner but struggled to generate interest as Isis fighters swept across parts of Iraq and Syria that summer, prompting Western investor interest to cool, according to a person familiar with the early stages of the project.
At the same time, two years of negotiations between Western powers and Iran on a nuclear deal had opened the possibility for renewed engagement with Iranian companies, the person said.
Mapna was ultimately awarded a $2.05bn contract to build and deliver the key technology for the Rumaila plant, backed by an Iraqi government payment guarantee signed on July 9, 2015 — days before the West’s nuclear deal with Iran.
Mapna, a power and infrastructure group founded in 1993, is one of Iran’s most successful companies, and the investment in Rumaila was championed by the Iranian regime. The plant received support from the Export Guarantee Fund of Iran in the form of a $300mn political risk insurance policy and is described on Mapna’s website as the company’s “largest international power project”.
The Shell joint venture agreed to take power from the Rumaila plant in 2019, signing a $35mn contract to build an 18km power line to a natural gas liquids (NGL) facility it was building nearby, according to documents shared with the FT by Unearthed, an investigative journalism group backed by Greenpeace.
The Basrah NGL plant is due to start operations in June and will pull up to 70MW of power from Rumaila, which could increase to 200MW as the NGL facility is enlarged.
The Rumaila plant has been producing up to 1,500MW of power since 2020. The Ministry of electricity is the sole provider of power in Iraq, meaning it acts in effect as a middleman at the Rumaila plant, paying Shamara and Mapna for the power produced and selling it to customers such as Basrah Gas.
Shamara collects 22 percent of the revenues, while the rest flows to Mapna as repayment for its work on the project, according to the documents and the three people involved in the contracts. Shamara declined to comment.
Shell stressed that it had “no dealings with Mapna or any Iranian entity”, adding that it could not comment on the ministry of Electricity’s “infrastructure, the flow of funds or their commercial arrangements with third-party suppliers or off-takers of power”.
“The sanctions have created a Catch-22 for Iraq,” said Yesar Al-Maleki, Gulf analyst at Middle East Economic Survey. “Washington understands that [Iranian gas and power imports] are crucial for the country’s political and social stability and continues to allow import waivers. But the limitations on transferring the payments to Iran mean that they are building up in Iraq.”
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