Iraq lets contract for oil export terminal upgrade

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Aug. 6 -- Iraq’s South Oil Co. let a project management contract to AOC Holdings subsidiary Japan Oil Engineering for the front-end engineering and design to restore and upgrade Iraq's Fao export oil terminal.

Under the contract, valued at 3 billion yen, JOE and Yachiyo Engineering Co., will help South Oil Co. design pipelines to connect a land-based oil storage facility in southern Iraq with two sea-based shipping terminals 50 km off Basra in the Persian Gulf.

JOE also will assist the Iraqi company to design tanker-mooring areas at the terminals under the contract, which is scheduled to run 3½ years from October 2009.

The undertaking, part of a larger loan agreement announced in January 2008 for the Crude Oil Export Facility Reconstruction Project, is to increase terminal capacity to 3 million b/d from the current 1.6 million b/d.

“This project aims to stabilize and strengthen Iraq’s crude oil export capacity, the lifeline of the Iraqi economy,” the agreement stated, adding that the reliability and capacity of the facility have been reduced “due to aging.”

The loan facility provided by the Japan Bank for International Cooperation for the Fao project amounted to 50.054 billion yen—just under one-fourth of the 182.7 billion yen in loans agreed upon at the time to restore war-damaged infrastructure in the Middle Eastern country.

Of that total, 2.1 billion yen were included for the Basra Refinery Upgrading Project to install such secondary units as a fluid catalytic cracker.

The Japanese government, keen to secure oil supplies from Iraq, has been eyeing several developments, including the Tuba and Nassirya fields.

After signing a memorandum of understanding with the Iraqi oil ministry in 2005, AOC last year completed research on the 3.5 billion bbl Tuba oil field and provided technical cooperation for new pipeline construction, as well as shipment facility refurbishment between wells and a crude terminal.

Earlier this month, Iraq's oil minister, Hussein al-Shahristani, told Japanese media during a visit to Tokyo that he expected a decision on the award of the Nassiriya field development contract in less than a month.

At the time, Japan's Minister of Economy, Trade and Industry Toshihiro Nikai, who met with al-Shahristani, requested special consideration of stakes sought by Japanese companies at Nassiriya and other oil and gas fields.

A consortium that includes Nippon Oil Corp. Inpex Corp. and JGC Corp. is seeking a stake in the oil field, while Eni SPA, Nippon Oil and Spain's Repsol YPF SA also are competing for a contract to develop the field, which has an estimated crude oil reserve of 4 billion bbl.

AOC Holdings is the holding company of Arabian Oil Co. Ltd., Fuji Oil Co. Ltd, Petro Progress Inc., and Japan Oil Engineering Co. The Saudi Arabian government and Kuwait Petroleum Corp. each hold a 7.4% stake in AOC Holdings.

Contact Eric Watkins at hippalus@yahoo.com.

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