Japan’s International Cooperation Agency (Jica) has signed an agreement to loan the Iraqi Ministry of Finance ¥110bn ($1bn) to upgrade the Basra oil refinery.

In a statement, Jica said: "This project will improve the quality and productivity of oil products through upgrading the existing oil refinery by installing a new fluid catalytic cracking (FCC) complex in Basra refinery, one of the biggest oil refineries in Iraq."

The whole upgrade project is estimated to be worth $1.5bn by the project-tracking service MEED Projects.

The deal was signed by Iraq’s Deputy Prime Minister for Economic Affairs and Minister of Finance Fuad Mohammad Hussein and Japan’s Ambassador to Iraq Naofumi Hashimoto.

Jica’s loan is one of the biggest loans Japan has ever provided for a single project in the Middle East and North Africa (Mena) region.

Under the terms of the agreement, the repayment period is 40 years and the loan has a 10-year grace period.

The expansion project aims to increase Iraq’s oil refining capacity by adding new units at the Basra refinery.

Light gas oil hydrodesulfurisation (HDS) technology will also be installed as part of the upgrade project.

State-owned downstream operator South Refineries Company is the client on the project.

Under existing plans, the FCC complex will have a capacity of 30,000 barrels a day (b/d).

The new units will be built on a greenfield site outside the existing refinery and will include storage facilities, associated utilities and control buildings.

The project is currently in the main contract bid phase and is expected to be completed in April 2024, according to the statement issued by Jica.