Iraqs downstream expansion plans are ambitious. A new refinery has not been built in the country for three decades, but since 2011 its has planned to build five from scratch, along with a series of projects to overhaul the existing facilities to improve the quality and range of refined products produced.
Three years on, the downstream plan is only just starting to take shape. Of the five projects, only one has been awarded so far, a $6.04bn contract to a South Korean consortium for the construction of the Karbala refinery. Not surprisingly, this is also the only project to be funded by the Iraqi government itself. International investors remain wary.
Iraq has no track record of closing major public-private energy deals, but instead has a history of botched attempts in its power sector. Compounding this is the increasingly serious security risk and political instability.
Some efforts to encourage investment have been made. The government has amended the refining laws, offering not just discounts on crude oil feedstock, but compensation for foreign investors for the net production from their refineries, as well as guarantees for production. So far, it has not been enough to attract investors to commit beyond signing memorandums of understanding.
In June, Iraq will have the first real test of the appetite for its downstream sector, when international oil companies and refining firms bid for the Nasiriyah Integrated Project, a combined 300,000 barrel-a-day refinery and upstream development. So far, more than 50 firms have been prequalified to bid for the scheme. The result will set the tone for the rest of the industry.