Domestic focus is best for Iraq

25 November 2009

The most logical step would be to create fertiliser plants to supply Iraq’s large agricultural sector

Baghdad took its first step towards creating a petrochemicals industry for Iraq when it established an integrated petrochemicals complex at Khor al-Zubair near Basra in 1976.

The same year, Riyadh oversaw the creation of Saudi Basic Industries Corporation (Sabic). The major Middle East governments had begun to realise the economic potential of converting their oil and gas supplies into chemicals and fertilisers.

Despite its early lead 33 years ago, Iraq has since failed to deliver on its petrochemicals potential. A comparison with Sabic – which in October reported third-quarter profits of $939m, despite the global slump in petrochemicals prices – puts the state of Iraq’s petrochemicals industry into perspective.

The two Gulf wars and the Iran-Iraq war have damaged the country’s three major plants. While the Khor al-Zubair complex still works, a combination of war and sanctions has taken its toll on the plant’s productivity.

Since 2003, major international energy companies including the US’ ExxonMobil Corporation and Chevron Corporation have discussed projects with Baghdad, but these talks have come to nothing. Plans to build a petrochemicals industry in the gas-rich north of Iraq, which is under the rule of the Kurdistan Regional Government (KRG), are making some progress, thanks to investment from the UAE’s Dana Gas and Crescent Petroleum. But northern Iraq lacks one crucial asset: a port from which to export petrochemicals products.

As a result, investors have yet to decide what to produce at the planned petrochemicals plants in the north. Without good transport links, the most logical step would be to create plants for fertilisers to supply Iraq’s large agricultural sector, and for chemicals and plastics to meet domestic demand.

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