Page 4 - DMEA Week 46

DMEA Commentary DMEA
Confusion as Iraq
reiterates, expands
refinery plans
An Oil Ministry undersecretary has expanded on his recently-announced refining plans, creating significant confusion about what projects are being developed and by whom.
middle east
What:
Iraq’s refining sector is in disarray and it seems that Baghdad’s approach is to keep re-announcing projects as if this is meant to appease restive citizens.
Why:
Efforts were recently outlined that would increase refining capacity by around 200,000 bpd
to 1mn bpd, but this expansion is now said to be doubling capacity.
What next:
Attracting big-name players to Iraq’s refining sector has proven challenging for at least a decade and this inconsistency will do nothing to improve this.
JuSt a few weeks ago, Iraq’s Ministry of Oil (MoO) undersecretary Hamid Al-Zawbaei said that Baghdad intended to proceed with refining projects that would add 200,000 barrels per day to the country’s refining capacity.
This week, he was quoted by local press as saying that a plan was in place to build five refin- eries, with the ministry searching for contractors to carry out the work.
Al-Zawbaei said that the refineries to be constructed would be located at Kirkuk (70,000 bpd capacity), Wasit (140,000 bpd), Nasiriyah (140,000 bpd), Basra (140,000 bpd) and al-Fao (300,000 bpd).
These units would add a total of 790,000 bpd, nearly doubling nameplate throughput capacity from the current level of 800,000 bpd.
Confusion
At the start of the month, Al-Zawbaei said that the increase would come from the expansion existing refineries and a new refining unit at the facility in Karbala, which has a design capacity of nearly 200,000 bpd.
Al-Zawbaei said that the Karbala refinery was 78% complete, with full commissioning antici- pated in late 2021.
Plans to develop a greenfield refinery at Karbala have been on the drawing board since 2007, when Baghdad launched a downstream development programme comprising four new plants across the country. Three of these were to have capacities of 140,000-150,000 bpd, with a 300,000 bpd facility planned at Nasiriyah as well.
Meanwhile, in July last year, the MoO “re-an- nounced” two refining projects first offered to investors in early 2017, at Diwaniya in the south-central Al-Qadisiyah governorate and at Samawa in Muthanna Province – each with capacity of 70,000 bpd and with a new deadline for proposals set at October 10.
this followed the extension of the dead- line to October 4 for prospective developers of a planned 100,000 bpd refinery at Kut in the
southeastern Wasit province. this had been re-launched to investors in May.
The MoO is still aiming to implement the schemes on a build-own-operate (BOO) or build-own-operate-transfer (BOOt) basis. This approach reflects the government’s parlous financial condition but nonetheless a model that has largely proved unsuccessful throughout Baghdad’s decade-long effects to enlist the pri- vate sector to improve downstream provision.
Both now and then, the ambitious announce- ments coincided with protests that spread across the south of the country over a lack of local ser- vices – in particular electricity shortages – and with statements from the MoO claiming to be ensuring adequate supplies of refined products to reactivate power stations.
Karbala is the only one of the original projects to have reached the construction phase follow- ing the MoO’s reversion to an engineering, pro- curement and construction (EPC) contract and its award to a South Korean consortium led by Hyundai Engineering & Construction in 2014. the plant remains unfinished more than five years later.
Meanwhile, a consortium of two Chinese state firms signed up in April last year to develop a 300,000-bpd export refinery on Basra’s Al Fao peninsula.
Work to rehabilitate and expand existing downstream plants has also achieved some recent milestones – notably the restart in Sep- tember of the first 70,000-bpd unit at the Baiji refinery on the Baghdad-Mosul road, once the country’s largest at 310,000 bpd but severely damaged during the IS invasion and occupation.
On January 28, the MoO announced that capacity at the Basra refinery had been expanded by 70,000 bpd to 210,000 bpd, adding that work was under way to increase potential throughput to 300,000 bpd.
Adding to this confusion was Al-Zawbaei’s mention of a total construction cost for the refineries of $3bn, then noted that the cost of
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w w w . N E W S B A S E . c o m Week 46 21•November•2019