Iraq woos companies to invest in refineries

July 5, 2010
Iraq, seeking to double its domestic refining capacity and reduce expensive imports, has offered discounted oil and acreage to companies willing to invest $20 billion on four refineries.

Iraq, seeking to double its domestic refining capacity and reduce expensive imports, has offered discounted oil and acreage to companies willing to invest $20 billion on four refineries.

"The investment in the new refineries will be around $20 billion. Each one will cost around $5 billion," said Iraq's Oil Minister Hussain al-Shahristani, referring to facilities at Karbala, Kirkuk, Maysan, and Nassiriyah.

"Refinery investments in Iraq are guaranteed more than anywhere else in the world," said al-Shahristani, adding that his country "wants real partners, at any percentage."

In an effort to attract investment, al-Shahristani said Iraq will allow investors to set prices for refined products, as well as offering a 5% discount on the price of oil used and land to build the refineries.

The need for improvement is underlined by the US Energy Information Administration, which said, "Iraqi refineries, with a total capacity of almost 600,000 b/d, have antiquated infrastructure, and their output does not reflect the current demand mix." EIA said despite improvements in recent years, the sector has not been able to meet domestic demand for most refined products, and the refineries produce "too much heavy fuel oil."

The result is that Iraq relies on imports for about 25% of the petroleum products it uses, with total petroleum product consumption averaging about 600,000 b/d in 2008.

"To alleviate product shortages, Iraq's 10-year strategic plan for 2008-17 set a goal of increasing refining capacity from 600,000 b/d to 1.5 million b/d," according to the EIA. "Iraq has plans for five new refineries, as well as plans for expanding the existing Daura and Basra refineries."

According to EIA, the Iraqi government actually wants to construct five new refineries at Baghdad (100,000 b/d), Kirkuk (150,000 b/d), Maysan (150,000 b/d), Karbala (150,000 b/d), and Nassirayh (300,000 b/d) in an effort to add capacity of 850,000 b/d to the country's current output.

The country has recently made several awards in connection with the development of its new refineries:

• Foster Wheeler won a contract earlier this month for a feasibility study and the engineering and design of the 300,000-b/d facility at Nassiriyah (OGJ Online, June 2, 2010).

• Technip will perform a feasibility study for the 150,000-b/d refinery at Karbala.

• Shaw Group will develop the 150,000-b/d project at Kirkuk and the 150,000-b/d facility at Maysan.

Meanwhile, local media report that an unnamed German firm has held discussions with officials in Basra aimed at improving the city's port facilities.

"The German company has offered key projects in the trade and oil fields to build near the Iraqi ports in Basra," one official told Aswat al-Iraq news agency. "The projects included cargo quays in the port of Umm Qasr and a plant to manufacture oil pipelines," he said.

Last month, Iraq's state-owned South Oil Co. (SOC), aiming to boost the country's export capacity, invited international contractors to submit expressions of interest by May 5 for an offshore oil export facility reconstruction project at the port of Basra on the Persian Gulf (OGJ Online, May 4, 2010).

The tender coincided with reports that problems at Umm Qasr are blighting Iraq's hopes of building economic prosperity on the back of multibillion-dollar agreements to develop its oil reserves.

Firms like BP PLC, Royal Dutch Shell PLC, and China National Petroleum Corp. are said to be struggling just to get the equipment they need off the boats and through the port to some of the country's largest oil field projects.

"We import lots of goods because we can't find all these materials in Iraq but there are problems with customs and tariffs," one oil executive told the Reuters news agency. "For me it's a nightmare."

SOC Director General Dhiya Jaafar acknowledged the problems and explained to Reuters that, "The human and technical capacities of the Iraqi ports company are insufficient to handle all the work."

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