Baghdad tenders $2bn refinery

10 February 2006
The Planning Department of the Oil Ministry issued for bid in late January the feasibility study and front-end engineering and design (FEED) package for the proposed 300,000-barrel-a-day (b/d) grassroots light crude refinery near Nasiriyah in the south of the country. The ministry is already evaluating initial offers from companies for two other grassroots refineries at Koya and one originally planned for Nahrain (MEED 27:6:06).

Companies have been invited to submit technical and commercial bids by 1 April for the Nasiriyah refinery. The open tender is likely to solicit a strong response from US, European and Japanese firms given that nearly all the work can be undertaken outside Iraq.

Estimated to cost $2,000 million, the proposed crude oil refinery will comprise two trains and be able to process 300,000 b/d of Basra light crude or Mishrif crude. The project includes process units, tank farms, major offsites and utilities, pipelines and the installation of the instrumentation, control and communications systems. The refinery will produce gasoline - hi-octane member and regular gasoline - kerosene, gas-oil, LPG and fuel oil.

The successful bidder will also carry out a study into how the project can be financed. Senior sources at both the Oil and Electricity Ministries told MEED on 1 February that financing remained a major stumbling block. 'There is no money for the project and until a new government is in place, which we do not expect until April, the situation is unlikely to change. We hope this tender will generate interest,' said one.

Baghdad has had to spend up to $200 million a month importing refined products from its neighbours to make up for the shortfall of fuel products. The ministry is hoping to involve the private sector through build-own-operate (BOO) or build-operate-transfer (BOT) models.

The much-anticipated release of the tender is a step forward for the country's struggling oil industry as it seeks to raise production and reduce sabotage on its facilities. Although Baghdad has nameplate refining capacity of more than 700,000 b/d, the combined effect of sanctions, under-investment and age means that the sector is only operating at 50 per cent capacity.

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