In this handout photo provided by the USGS, A satellite view shows smoke billowing from the Baiji North refinery complex on June 18, 2014 in Baiji

All eyes have been on risks to Iraq’s continued ability to supply world markets with oil, but power generation is critical to keeping regional populations calm and facilitating oil industry operations. The violently-contested Baiji refinery supplies refined products to the domestic market, but there is also a 1,320 MW power plant nearby that supplies 10% of the country’s electricity.

Power shortages and strains to the electrical grid could necessitate shifting loads to major population centers like Baghdad and away from energy-intensive southern oil operations, which could thus negatively impact production and export volumes.

“Iraq has made great strides in improving grid access, but continued poor reliability has encouraged widespread use of diesel-fired generators. Diesel-fired electricity in Baghdad alone totaled at least 1000 MW. Even before recent events, peak summer power demand, which is 50% higher than the rest of the year, was expected to strain the system. Power curtailments, particularly during peak summer months, could fuel public unrest in parts of the country that Prime Minister Maliki will need to keep under control. Previous summer blackouts have sparked protests in key southern cities such as the oil hub Basra. Now that refined product output from Baiji and associated gas from the Northern oil fields are at risk, these sources may not be able to fuel thermal generation in the rest of the country. … In addition to ensuring power supply to the populace, stable power provision from the grid is essential to the continued operation of Iraq’s energy industry. These southern facilities are consuming even more power in recent years, as production has ramped up rapidly from gas and water reinjection facilities. Stable power supply is essential for pump stations, refineries, and injectors to function properly. Therefore, a cut-off of electricity supply to Baghdad and other major population centers could require redirecting power away from the southern oil facilities to the further detriment of oil production levels.” – Barclays Geopolitical Instant Insight – “Iraq: Off the grid?”