Iraq's oil ministry is revisiting a program announced four years
ago to build four new refineries, while dropping a number of
previously planned schemes.
After years of stalling on its downstream projects, Iraq's new oil
minister Jabbar al-Luaibi has invited international oil companies to
invest in the construction of a raft of new refineries across the
country.
Companies would be invited this week to discuss the issue, oil
ministry spokesman Assem Jihad said in a statement Sunday.
The ministry also plans to double Iraq's crude oil storage capacity
to 24 million barrels, over the next few years through international
investment, Luaibi said after inspecting a tank farm near the Zubair
oil field.
Iraq is offering either a build, own, operate or a build,
operate, transfer contract model for new refineries, where the
private sector constructs the facility, operates it, and eventually
hands it over to the government.
The country has struggled to attract private investment after
finally breaking with its tradition of state control over the oil
industry.
Baghdad passed a refining law in 2007 which gives foreign companies
the right to build refineries and operate them over a 40-year
period. It also set out the overall terms of investment.
A 2010 amendment to the law was supposed to make it even more
attractive. The oil ministry's statement did not mention the
Nassiriyah integrated project, which was linked to the oil field of
the same name and included a 300,000 b/d refinery, the largest of
the greenfield facilities proposed earlier.
The project has been offered in various forms to investors since
2008, but is still to find an investor. A bidding round, most
recently scheduled for 2013, has been delayed indefinitely.
DELAYS, CANCELLATIONS
Faced with a pressing lack of refining capacity, Baghdad has for a
long time sought to attract investment in new refineries as well as
upgrading and expanding its existing facilities.
The need has become more urgent since the shutting of the 310,000
b/d Baiji refinery in mid-2014 after attacks by the IS.
So far, of the planned grassroots facilities, only one, the 200,000
b/d facility at Karbala, is under construction, with completion
scheduled for 2019.
Even here, the Iraqis are falling behind schedule due to a funding
shortfall as low global oil prices hit Iraq's budget, though a
senior oil ministry official said that approval was given to pay
contractors in crude liftings.
The 140,000 b/d refinery is being built under a $6 billion BOT
contract by a consortium led by Hyundai E&C. But the funding, to
come from Iraq's annual budget, is at risk, deputy oil minister
Fayadh Nema said in June.
A 150,000 b/d refinery in Missan province was awarded in a secret
deal to French-Swiss company Sataram and China's Wahan, which
sources close to the deal said was a subsidiary of state-owned China
National Petroleum Corp. Despite a groundbreaking ceremony in
February, it is not clear what, if any, steps have been taken since.
Brownfield rehabilitation projects are also making slow progress.
After many delays, the oil ministry signed a contract in October
last year with Czech engineering firm Technoexport to build a new
crude distillation unit at the 210,000 b/d Basra refinery in the
south of the country, adding 70,000 b/d of processing capacity.
The company has been given two years to develop the project, once
financing is secured.
Part of this will come from a loan of more than $2 billion from the
Japan International Cooperation Agency, which was approved in July.
--Adal Mirza,
adal.mirza@spglobal.com
--Ben Lando,
newsdesk@spglobal.com
--Edited by E Shailaja Nair,
shailaja.nair@spglobal.com
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