In a groundbreaking move for Iraq’s energy landscape, Texas-based Excelerate Energy Inc. is in advanced talks to supply the country’s first-ever liquefied natural gas (LNG) import terminal, a floating storage and regasification unit (FSRU) at Khor Al-Zubair port in Basra. This development marks a pivotal step in Iraq’s quest for energy security and its deliberate effort to reduce reliance on Iranian gas imports. With power outages plaguing the nation and geopolitical pressures mounting, Iraq’s push for LNG could reshape its energy future. Here’s the story behind this transformative deal, including the volume at stake and the reasons driving Iraq’s pivot away from Iran.
The Deal: Excelerate Energy’s Bid and the LNG Terminal
Iraq’s state-run South Gas Company, tasked with overseeing the project, is negotiating with Excelerate Energy to provide an FSRU capable of receiving, storing, and regasifying LNG for integration into Iraq’s power grid. According to Ali Salman, acting director general of South Gas Co., Excelerate is among several firms bidding to supply the terminal and secure LNG cargoes. The FSRU, to be moored at Khor Al-Zubair, will connect to Iraq’s gas network via a 40-kilometer pipeline, with completion expected by summer 2025.
The terminal is projected to handle at least 500 million cubic feet per day (MMcf/d) of regasified LNG, equivalent to roughly 14 million cubic meters per day. This volume could replace approximately 50% of the gas Iraq currently imports from Iran, which has historically supplied up to 1.4 billion cubic feet per day (Bcf/d) via two pipelines. Additionally, Iraq is in talks with Algeria for a medium-term contract to supply 1 million tons per year of LNG (approximately 140 MMcf/d), signaling a multi-supplier strategy to bolster the terminal’s throughput.
Excelerate, a leader in floating LNG infrastructure, brings expertise from projects like its 15-year LNG supply deal with Bangladesh, set to deliver up to 1 million tons per annum starting in 2026. Its potential role in Iraq underscores the country’s ambition to leverage global LNG markets to stabilize its electricity sector, which generates 27,000 megawatts daily but faces a shortfall of nearly 10 gigawatts during peak demand.
Why Iraq Is Distancing Itself from Iran
Iraq’s pursuit of LNG imports is driven by a mix of energy security concerns, geopolitical pressures, and economic necessities, all of which point to a strategic distancing from Iran. Here are the key factors:
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Unreliable Iranian Gas Supplies: Iraq relies on Iran for 25–43% of its electricity, with Iranian gas fueling power plants via pipelines from Ilam province. However, these supplies are notoriously inconsistent. In 2023, Iran cut gas exports to Iraq by half due to unpaid bills, exacerbated by U.S. sanctions that restrict Iraq’s ability to pay Iran directly. More recently, in December 2024, Iran halted exports entirely due to high domestic demand during a harsh winter, slashing Iraq’s power output by a third. These disruptions have left Iraq vulnerable to blackouts, particularly during summer peaks when demand soars.
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U.S. Sanctions and Policy Pressure: The U.S. has long urged Iraq to diversify its energy sources to reduce Iran’s influence, a priority intensified under the Trump administration’s “maximum pressure” campaign. In March 2025, the U.S. revoked a sanctions waiver that allowed Iraq to import Iranian electricity, though gas import waivers remain contentious. The Trump administration’s National Security Presidential Memorandum 2 (NSPM-2), issued in February 2025, signaled intent to end such waivers, pushing Iraq to seek alternatives. The U.S. has also supported Iraq’s energy independence through investments, with American firms like KBR, Baker Hughes, and GE collaborating on projects to capture flared gas and develop domestic resources.
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Geopolitical Realignment: Iraq’s leadership, under Prime Minister Mohammed Shia al-Sudani, is navigating a delicate balance between maintaining ties with Iran and aligning with Western and Gulf partners. The halt of Iranian electricity imports in 2025, following the U.S. waiver’s expiration, forced Iraq to explore LNG from Qatar, Algeria, and Oman, as well as gas deals with Turkmenistan. These moves reflect Baghdad’s intent to diversify suppliers and reduce exposure to Iran’s leverage, especially after Iran’s threats to influence Iraq’s parliament to divert energy project funds.
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Economic and Environmental Incentives: Iraq spends $4–5 billion annually on Iranian gas imports, a costly dependency given its own vast reserves of 125.6 trillion cubic feet of natural gas, the tenth largest globally. However, chronic underinvestment and flaring of associated gas have limited domestic production. The LNG terminal offers a quicker solution to bridge this gap while Iraq develops projects like the Nahr Bin Umar field, which could yield 700 billion cubic meters of gas. Additionally, capturing and utilizing LNG aligns with U.S.-backed goals to reduce gas flaring, addressing climate concerns.
The Bigger Picture: Iraq’s Energy Future
Iraq’s LNG terminal is more than a technical project; it’s a statement of intent. By partnering with Excelerate Energy and other global players, Iraq aims to secure 28 gigawatts of power by summer 2025, though this will still fall short of peak demand. The terminal complements other initiatives, such as a second LNG facility planned at Faw port, agreements with GE Vernova for 24,000 MW of gas-fired power plants, and a $27 billion deal with TotalEnergies for gas capture and solar power.
However, challenges remain. Iraq’s grid infrastructure is outdated, with distribution losses exceeding 50%, and political instability could derail progress. Pro-Iranian militias, which wield significant influence, may resist efforts to diminish Tehran’s role, and corruption risks complicating project execution.
Conclusion: A Step Toward Energy Sovereignty
Excelerate Energy’s bid to supply Iraq’s first LNG terminal, with a capacity of at least 500 MMcf/d and potential imports of 1 million tons per year from Algeria, is a cornerstone of Iraq’s strategy to break free from Iran’s energy grip. Driven by unreliable Iranian supplies, U.S. sanctions, and the need for economic and geopolitical diversification, Iraq is betting on LNG to stabilize its power sector and assert greater sovereignty. As negotiations advance, the world watches to see if Iraq can turn this bold vision into reality, setting a precedent for energy transitions in the Middle East.
Sources: Bloomberg, Investing.com, Reuters, Shafaq News, Forbes, Energy News, and posts on X. For further details, visit energynewsbeat.com.
