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Karbala refinery on track. By AYMAN OGHANNA/Iraq Oil Report

BAGHDAD – An engineering, procurement and construction (EPC) contract to build the $4 billion Karbala refinery will be signed by the beginning of 2014, part of a revived effort by Baghdad to boost its neglected refining sector.

“It was supposed to be awarded this year, but there were some issues related to the [budget] allocations for it, and probably it will be awarded at the beginning of next year and the Iraqi government will finance it,” said Deputy Oil Minister Fayadh Nima, speaking on the sidelines of a conference at the Oil Ministry in Baghdad on Wednesday.

Seven years after passing a refinery investment law, and after multiple iterations of sweetening the deals to lure investors, the Oil Ministry has decided to self-fund the construction of refineries, starting with the 140,000 barrel per day (bpd) Karbala refinery.

“There are many companies [interested in the project] – Japanese, Korean, Chinese, and American,” Nima said. “They are in four consortiums. In total there are about 12 companies.”

France’s Technip was awarded a project management consulting contract in June for the Karbala refinery, which will give it a leading role, along with Nima, in overseeing the EPC tendering process as well as management of the execution of the EPC work.

Iraq has roughly 700,000 barrels per day (bpd) of refining capacity now, outside of the Kurdistan region, but still imports nearly every type of fuel except for benzene. The new refineries, which are also to be located in Missan, Nassiriya, Kirkuk and Mosul, would add roughly 900,000 bpd capacity.

“There are works going on to add new units to the current refineries in Daura, Baiji and Basra in order to increase the refining capacity and to improve the quality of benzene,” Nima said. “There will be an increase in the refining capacity to exceed 700,000 bpd, instead what it is now, 650,000 bpd.”

All the greenfield refinery projects are open for investors, but Iraq will go down the list one by one and reinvest the massive oil revenue windfall into its oil sector, officials said.

Earlier this month, the Swiss-based Satarem signed a memorandum of understanding for the 150,000 bpd Missan refinery.

Front-End Engineering and Design projects have already been conducted on Karbala, Kirkuk, Nassiriya and Missan proposed refineries, in hopes of luring investors, which get a guaranteed, discounted crude supply and preferential tax and land treatment, among other incentives.

The 300,000 bpd Nassiriya refinery has been taken out of this investment scheme, having been combined with the 4 billion barrel Nassiriya oil field in a special bidding round scheduled for Dec. 19. The terms are still being worked out and will be unveiled to investors in mid-November.

The country has growing needs for products – and an untapped potential to be a net exporter of fuel – and has decided to become more proactive in its refining sector.

By Staff of Iraq Oil Report
Published Thursday, October 24th, 2013

 

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