Page 7 - AsianOil Week 01 2021

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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 now turn its attention to

resolving its lengthy woes with gas availability

COMMENTARY IRAQ has finalised an agreement for the devel- China North Industries Group Corporation Ltd
opment of its planned new downstream hub in (Norinco), Power Construction Corporation of
WHAT: the far south as several of the country’s power China (PowerChina), with that award having
Chinese firm Hualu plants went offline amid a reduction in gas sup- failed to lead to any progress.
and its parent will plies from neighbouring Iran. However, also in July, the MoO chose the
implement a multi- al-Awsat Energy consortium – comprising
billion-dollar refining and Refinery and petchems Norinco, PowerChina, China Nuclear Engi-
petrochemical facility on Iraqi and Chinese officials this week signed an neering & Construction (CNEC) and an
Iraq’s al-Fao peninsula. agreement for investment in an integrated refin- unnamed Emirati company – to develop a
ery and petrochemical complex on the al-Fao 100,000 bpd refinery in the southern Dhi Qar
WHY: Peninsula south-east of Basra. Governorate.
Despite upstream The contract was signed on behalf of Iraq’s The facility will include units for hydrogena-
success, Iraq remains Ministry of Oil (MoO) by the director-general tion, benzene improvement, isomerisation,
reliant on imports to of state-owned South Refineries Co. (SRC) and fluid catalytic cracking (FCC), continuous cat-
keep the lights on, and Yu Fang Chunk, general manager of Hualu alytic reforming (CCR) and asphalt production
continues to be plagued Engineering & Technology, an affiliate of China as well as an electric power production unit, and
by power shortages. National Chemical Engineering Co. (CNCEC). will be configured to produce Euro 5 specifica-
The contract signing follows the MoO receiv- tion fuels.
WHAT NEXT: ing guarantees from China’s state-owned Assets Gas feedstock will be vital to the power and
Iranian supplies Supervision and Administration Commission petrochemical elements of these facilities, but
are susceptible to (SASAC) in July 2020 for the financing of the while the long-term outlook holds significant
interruption given Iraq’s project. CNCEC was then awarded a contract potential, the availability of gas continues to
inability to clear its to construct the facility under a build-own-op- pose a headache for Baghdad.
arrears, and the country erate-transfer (BOOT) contract model. Sources
is finally shifting its within the MoO told Downstream MEA Power out Iraqi and Chinese
attention to developing (DMEA) it would cost $6bn for the refinery and Just as the paperwork was being signed on the
domestic gas resources. up to $12bn for the petchems unit, which will be refining deal, Ahmed Moussa, spokesman for officials this
developed at a later stage. Iraq’s Ministry of Electricity (MoE), told media week signed an
At the time, Oil Minister Ihsan Abdul Jabbar that several of the country’s power plants had
said: “We awarded this project to CNCEC after gone offline because of a sharp decrease in gas agreement for
receiving guarantees from SASAC to provide supplies from Iran.
full funding.” Moussa said that gas flows had been reduced investment in
CNCEC’s contract includes construction of from 50mn cubic metres per day to around 8.5
the refinery, technology transfer, operation, mcm per day, reducing electricity supplied to an integrated
training and maintenance as well as a vague the national grid by around 4,000 MW to just refinery and
mention of clean energy. 13,000 MW and causing widespread power
The facility will have a refining capacity of shortages mainly in central and southern petrochemical
300,000 barrels per day (bpd), with the petro- regions.
chemical complex being capable of processing In addition to the cross-border gas flows, complex.
3mn tonnes per year (tpy). Iraq imports around 1,200 MW of electricity
Abdul Jabbar said that the complex will pro- from Iran, with the combination accounting
duce oil derivatives, plastics and condensates, for around a third of the country’s peak winter
employing around 10,000 workers. demand of around 35,000 MW.
The award to CNCEC came three and a half While over-reliance on Iran is nothing new, it
years after a contract for the construction of has come into greater focus in recent months as
the refinery was awarded to state-owned firms Iraq’s neighbour races to develop its gas reserves

Week 01 07•January•2022 www. NEWSBASE .com P7