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Focus shifts to delivery of Iraq utilities expansion

12 May 2026

 

Iraq’s power and water sector recorded its largest year of investment on record in 2025, with more than $17bn in combined contract awards.

Several long-planned water infrastructure schemes finally reached contract award stage amid mounting supply pressures in the south of the country and a growing reliance on new desalination projects.

Iraq awarded $10bn-worth of water infrastructure contracts between January 2025 and May 2026, according to regional projects tracker MEED Projects.

This compares with just $1.8bn in total awards across 2022, 2023 and 2024, when only one seawater desalination plant reached the contract award stage.

Desalination projects

Attention is now turning to the delivery phase of new plants led by a series of major desalination and water treatment projects in Basra governorate.

In February, Iraqi officials said the flagship $2.42bn Basra seawater desalination plant could be financed through the Iraqi-Chinese Fund, weeks after the main engineering, procurement and construction (EPC) contract was awarded to PowerChina.

Located on the Arabian Gulf coast in Al-Faw, the plant is designed to produce 1 million cubic metres a day (cm/d) of potable water. The project also includes a water transmission network supplying 11 cities and a dedicated 300MW power plant.

Baghdad had earlier announced plans for four additional desalination plants across the province in July 2025. These include the Shatt Al-Arab plant, planned to produce 120,000 cm/d of desalinated water, and the Al-Faw and Al-Siba plants, each with a capacity of 72,000 cm/d.

The joint venture of Baghdad-headquartered Al-Rida Investment Group and PowerChina has been appointed as the main contractor for each project, with construction expected to begin in the third quarter of 2026.

Additional schemes include the $72m Safwan desalination plant and the $70m Abu Flous desalination project. Abu Flous is being undertaken by the Ministry of Water Resources and is designed to have a capacity of 72,000 cm/d.

The push to advance new projects follows warnings issued last year by Iraq’s High Commission for Human Rights about a worsening humanitarian situation linked to declining river flows and rising salinity levels in the Shatt Al-Arab waterway.

Alongside municipal water projects, Iraq is also advancing large industrial water infrastructure schemes tied to the energy sector. Last August, Iraq approved the award of the Common Seawater Supply Project package for the Artawi oil field to South Korea’s Hyundai Engineering & Construction.

The estimated $3.16bn contract covers the engineering, procurement, supply, construction, commissioning and operation of a major seawater treatment facility. Construction is expected to begin in 2026, further reflecting the scale of projects now in the execution stage.

Power expansion

In parallel, Iraq’s power sector is undergoing one of its largest expansion programmes in decades as the government attempts to address chronic electricity shortages, diversify fuel sources and strengthen regional grid connectivity. Over $40bn-worth of projects are under execution, following $4.2bn in new contracts last year.

In August 2025, the Iraqi cabinet approved five major power generation schemes with a combined capacity exceeding 10GW. The projects represent one of the country’s largest-ever single rounds of power project approvals.

The centrepiece of the programme is three independent power producer (IPP) combined-cycle plants at Al-Faw, Abu Ghraib and Kirkuk, with a total capacity of 7,500MW.

The largest schemes are the 3,000MW Al-Faw plant in southern Iraq, with US-based General Electric as the EPC contractor, and the 3,000MW Abu Ghraib facility near Baghdad. Both projects will be implemented under 25-year build-own-operate models.

A 1,500MW combined-cycle plant in Kirkuk will also be developed under long-term power purchase agreements backed by sovereign guarantees from the Finance Ministry. US-based GE Vernova is the technology provider for all three projects.

Furthermore, the government has approved two thermal power plants in Najaf and Youssifiyah, with planned capacities of 1,500MW and 1,800MW, respectively.

This is part of a wider 20-year electricity strategy unveiled last year in partnership with Siemens Energy and GE Vernova. The programme aims to add 57GW of new generation capacity through a mix of gas-fired, thermal and renewable energy projects.

Electricity shortfall

The scale of the challenge means timely project execution will be critical. Iraq currently produces about 28GW of electricity, according to the Electricity Ministry, but demand during peak summer periods is estimated at more than 50GW. The shortfall continues to result in widespread outages and pressure on the national grid.

The fragility of the system was exposed again in March, when Iraq suffered nationwide electricity blackouts after a sudden drop in gas supplies to the Rumaila power plant in Basra. The disruption led to the loss of about 1,900MW of generation capacity and triggered a nationwide grid collapse.

The incident highlighted Iraq’s continued dependence on associated gas production from the oil sector. With regional geopolitical tensions affecting oil exports and production, gas availability for power generation has become increasingly vulnerable.

Solar plants

As part of a strategy to diversify energy sources, the country inaugurated the first phase of the 300MW Karbala solar IPP plant in September 2025, marking Iraq’s first utility-scale solar scheme connected to the national grid.

Developed by a consortium of Norway’s Scatec, Egypt’s Orascom Construction and Iraq’s Al-Bilal Group, the project forms part of the government’s target to add 10GW of solar energy by 2030.

These plans also include the 1GW solar IPP in Najaf, now under construction and scheduled for commissioning in 2028.

Looking further ahead, the Iraqi government announced in February that it has allocated more than 140 sites for new solar power plants, following a six-month identification process. The locations are distributed across several regions, including the outskirts of Baghdad and areas such as Nahrawan, Al-Nasr, Al-Salam, Al-Hamamiyat, Taji and Al-Husseiniya.

Meanwhile, regional interconnection projects are also becoming increasingly important. Iraq is progressing with plans to integrate into the GCC electricity grid through a new 400kV transmission link between Kuwait’s Al-Wafra station and Iraq’s Al-Faw station.

The first phase of the project will allow 500MW of electricity imports into Iraq, rising to 1,800MW over time. Iraq is targeting full integration of the GCC-Iraq grid by the end of 2026.

MEED’s June 2026 report on Iraq also includes:

> OVERVIEW: Iraq enters era of resilience, reform and rising risks
> OIL & GAS: Iraqi oil and gas sector in crisis

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Mark Dowdall

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