Iraq relaunches investment plan to expand its downstream capacity
Source: Arabian Oil and Gas
Iraq’s oil ministry is revisiting a program announced four years ago to build four new refineries.
Iraqi Oil Minister Jabbar al-Luaibi has invited international oil companies to invest in the construction of new facilities as the country looks to expand its downstream capacity. The ministry also plans to double Iraq’s crude oil storage capacity to 24 million barrels over the next few years through international investment, reports Platts.
Iraq is offering both a build-own-operate, or a build-operate-transfer contract model for the new refineries, where the private sector constructs the facility, operates it, and eventually hands it over to the government.
The country changed its laws in 2007 in order to make international investment into downstream operations more attractive. Iraq loosened the control of the state oil company by allowing foreign companies to build refineries and operate them over a 40-year period.
ISIS aggression shuts in refining capacity
The need for increased refining capacity has become more salient as ISIS continues to target oil and gas operations around the country. In mid-2014, Iraq lost 310 MBOPD of refining from the Baiji facility, while attacks at the end of July took the 175 MBOPD Bai Hassan facility offline temporarily. Bai Hassan later resumed operations at 100 MBOPD, but continued tensions between the central government in Baghdad and the semi-autonomous region of Kurdistan, which now controls the area around the facility, have left its output in limbo as well.
A worker at the Basra Oil Refinery
Iraq has a number of projects in the works to help recoup the last capacity, including a 140 MBOPD facility at Karbala, which is slated for completion in 2019. So far, it is the only grassroots facility to reach the construction phase, and already it is behind schedule due to funding shortfalls from lower oil prices.
The refinery is being built under a $6 billion BOT (build-operate-transfer) 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.
Other projects currently moving forward include a 150 MBOPD refinery in Missan province, which was awarded to French-Swiss company Sataram and China’s Wahan, and a brownfield rehabilitation project to build a new crude distillation unit at the 210 MBOPD Basra refinery, which would add 70 MBOPD of processing capacity.
