Iraq hopes to complete first new refinery by 2021

25 November 2018

Originally planned for operation next year, Iraq now plans to complete the construction of its long-delayed Karbala refinery by 2021, a senior Oil Ministry official was reported saying on 21 November.

Operations at the 140,000 barrels-a-day (b/d) refinery will ease Baghdad’s reliance on refined product imports, deputy oil minister Fayadh Nema told reporters on 21 November.

Nema said Iraq has a capacity of 800,000 b/d, and the country was refining roughly 700,000 b/d.

Work on the $7.3bn Karbala refinery project came to a standstill in early 2017 as its consortium of contractors waited for payments. Only sporadic payments in the form of crude oil, rather than cash, have been made to the contractors, market sources have previously said.

The consortium, led by South Korea’s Hyundai Engineering & Construction, stopped work on the project in early 2017 due to Iraq’s State Company for Oil Projects (Scop) failing to make payments, due to budget constraints from Baghdad.

Hyundai E&C won the contract as part of a consortium in January 2014. The other companies in the consortium are GS E&C, SK E&C and Hyundai Engineering, all of South Korea.

None could be reached for a comment on the status of the project.

France’s Technip carried out the front-end engineering and design (feed) for the project and is now project management consultant (PMC).

The Karbala refinery, 100km south of Baghdad, will be Iraq’s first new downstream facility in decades, and as its most technically advanced refinery forms a key part of the country’s downstream strategy.

The Oil Ministry has proposed a number of new refinery projects, but so far only Karbala refinery has moved forward. The government decided to finance the Karbala refinery project itself out of frustration with its inability to attract private investment into the sector, and growing fuel demand.

Despite its huge oil wealth, Iraq still has to import more than 700,000 b/d of oil products, according to the latest figures from the Joint Organisations Data Initiative.

Earlier this year, Iraq signed a number of initial agreements with two Chinese oil companies to build a new 300,000 b/d refinery and petrochemicals complex at Al-Fao in southern Iraq. It has also mooted plans for investment in new refineries to be built in the western Anbar and eastern Dhi-Qar provinces.

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