The Iraqi oil ministry is talking to several international oil companies about investment in four planned refineries throughout Iraq to meet increasing domestic demand, the country’s deputy oil minister has said.
“The estimated cost of these four new refineries that are designed to produce some 740,000 barrels a day of refining capacity is more than $20 billion,” Ahmad al-Shammaa told Dow Jones Newswires in an exclusive interview.
Shammaa said Iraq’s first priority refinery is in Kerbala governorate south of Baghdad with a production capacity of 140,000 barrels a day and an estimated cost of $4 billion.
Kerbala refinery is in the front-end engineering and design phase now. Technip SA (TEC.FR), which was awarded the FEED contract last year, is expected to finish the designs at the beginning of next year, he said.
The ministry is offering investors three options: build, own and operate, build, operate and transfer and a joint venture with a state company, he added.
Designing the refinery is the last step before inviting companies to tender for the refinery. However, three South Korean companies have already shown interest in building the refinery, he said without naming them.
The second priority is to build a refinery in Missan governorate in southern Iraq with a capacity of another 150,000 barrels a day, he said.
U.S. Companies Shaw Group Inc (SHAW) along with Stone & Webster Inc (XD-SEW), are designing the refinery and they are expected to finish the front-end engineering design next year. It will also cost around $4 billion, Shammaa said.
Iraq also plans to build the Nassiriya refinery, near the city of Nassiriya in the south, to process 300,000 barrels a day. Shammaa said that products of the refinery would be exported via Iraq’s export terminal in Basra in southern Iraq. The refinery is being designed by Foster Wheeler AG (FWLT) “We need also to work out a network of pipelines that would carry products to our export terminals in Basra,” he said.
The fourth refinery is planned in the oil-rich Kirkuk governorate with another 150,000 barrels a day processing capacity, he said. Shaw Group and Stone & Webster are designing the refinery.
Iraq, the only member of the Organization of Petroleum Exporting Countries that doesn’t have to adhere to an oil production quota, is facing a fuel shortage. The country, which has the world’s third largest crude reserves, presently imports more than a quarter of its fuel needs.
Iraq has three major refineries in Baghdad, Basra and Baiji 200 kilometers north of the capital, as well as a scattering of smaller refineries throughout the country, with designed capacities of 750,000 barrels a day. But outstanding repairs, crude transport bottlenecks, acts of sabotage and crude oil storage capacity cut their operational capacity to around 530,000 barrels a day.
The Iraqi oil ministry and the national investment commission held a joint conference at the ministry’s headquarters in Baghdad last month, in an attempt to attract international refinery investors to build these refineries. At that meeting, the ministry announced that it would give a discount of 5% to its crude oil prices to investors in these refineries.
The Iraqi refining sector has been eclipsed by the higher profile of the upstream development of the country’s vast oil reserves. If the 11 deals signed last year and this year with international oil companies prove to be successful, Iraqi output capacity will jump from 2.5 million barrels a day to more than 12 million barrels a day in seven years, increasing the demand on the country’s refineries.