Page 4 - DMEA Week 01 2021

DMEA COMMENTARY DMEA

Iraq signs refining

deal as gas flows

halt power plants

As the ink sets on a deal to develop downstream facilities in
southern Iraq following financial agreements last year, Iraq must

turn its attention to resolving its lengthy woes with gas availability.

MIDDLE EAST IRAQ has finalised an agreement for the devel- employing around 10,000 workers.
opment of its planned new downstream hub in The award to CNCEC came three and a half
the far south as several of the country’s power years after a contract for the construction of
WHAT: plants went offline amid a reduction in gas sup- the refinery was awarded to state-owned firms
Chinese firm Hualu plies from neighbouring Iran. China North Industries Group Corporation Ltd
and its parent will (Norinco), Power Construction Corporation of
implement a multibillion- Refinery and petchems China (PowerChina), with that award having
dollar refining and Iraqi and Chinese officials this week signed an failed to lead to any progress.
petrochemical facility on agreement for investment in an integrated refin- However, also in July, the MoO chose the
Iraq’s al-Fao peninsula. ery and petrochemical complex on the al-Fao al-Awsat Energy consortium – comprising
Peninsula south-east of Basra. Norinco, PowerChina, China Nuclear Engineer-
WHY: The contract was signed on behalf of Iraq’s ing & Construction (CNEC) and an unnamed
Despite upstream Ministry of Oil (MoO) by the director-general Emirati company – to develop a 100,000 bpd
success, Iraq remains of state-owned South Refineries Co. (SRC) and refinery in the southern Dhi Qar Governorate.
reliant on imports to Yu Fang Chunk, general manager of Hualu The facility will include units for hydrogena-
keep the lights on, and Engineering & Technology, an affiliate of China tion, benzene improvement, isomerisation, fluid
continues to be plagued National Chemical Engineering Co. (CNCEC). catalytic cracking (FCC), continuous catalytic
by power shortages. The contract signing follows the MoO receiv- reforming (CCR) and asphalt production as well
ing guarantees from China’s state-owned Assets as an electric power production unit, and will be
WHAT NEXT: Supervision and Administration Commission configured to produce Euro 5 specification fuels.
Iranian supplies (SASAC) in July 2020 for the financing of the Gas feedstock will be vital to the power and
are susceptible to project. CNCEC was then awarded a contract petrochemical elements of these facilities, but
interruption given Iraq’s to construct the facility under a build-own-op- while the long-term outlook holds significant
inability to clear its erate-transfer (BOOT) contract model. Sources potential, the availability of gas continues to pose
arrears and the country within the MoO told Downstream MEA a headache for Baghdad.
is finally shifting its (DMEA) it would cost $6bn for the refinery and
attention to developing up to $12bn for the petchems unit, which will be Power out
domestic gas resources. developed at a later stage. Just as the paperwork was being signed on the
At the time, Oil Minister Ihsan Abdul Jabbar refining deal, Ahmed Moussa, spokesman for
said: “We awarded this project to CNCEC after Iraq’s Ministry of Electricity (MoE), told media
receiving guarantees from SASAC to provide full that several of the country’s power plants had
funding.” gone offline because of a sharp decrease in gas
CNCEC’s contract includes construction supplies from Iran.
of the refinery, technology transfer, operation, Moussa said that gas flows had been reduced
training and maintenance as well as a vague from 50mn cubic metres per day to around
mention of clean energy. 8.5mcm per day, reducing electricity supplied
The facility will have a refining capacity of to the national grid by around 4,000MW to
300,000 barrels per day (bpd), with the petro- just 13,000MW and causing widespread power
chemical complex being capable of processing shortages mainly in central and southern
3mn tonnes per year (tpy). regions.
Abdul Jabbar said that the complex will pro- In addition to the cross-border gas flows,
duce oil derivatives, plastics and condensates, Iraq imports around 1,200 MW of electricity

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