Iraq’s Oil Ministry has signed a Memorandum of Understanding (MoU) for the construction of a 200,000-barrel-a-day (b/d) refinery with the local/UAE Refinery of Karbala Corporation (RKC).

RKC, a joint venture of UAE-based Atconz Group and Italy’s Invest International, plans to build the refinery at Karbala, 100 kilometres south of Baghdad, on a 6-square-kilometre plot of land. The estimated cost is $6.5bn.

According to Sam Michael, RKC’s executive manager, Italy’s Saipem will provide engineering, procurement and construction (EPC) services for the processing plant, as well as training and assistance with the refinery operations.

The technical configuration for the refineries will be agreed between the Oil Ministry and RKC, with construction expected to start in early 2012, says Michael.

Ahmed al-Shamma, undersecretary for refineries affairs at the Oil Ministry, says the MoU is only valid for six months. However, the ministry is not bound to the scheme beyond this, according to Aswat al-Iraq news agency.

Under the build, own, operate (BOO) deal, RKC has committed to begin production of high-octane gasoline and diesel fuel for domestic consumption within four years of signing the final contract.

The planned refinery is some 60,000 b/d larger than the proposed 140,000 b/d refinery, for which France’s Technip won a $25.2m front-end engineering and design (feed) contract in 2009. The company completed a feasibility study at the end of 2010. Sources close to the firm said in May that the government was considering the project, but no decision had been made.

Three other refineries are planned: 300,000 b/d at Nassiriyah in south Iraq; and two 150,000-b/d refineries in Missan province in the south and at Kirkuk in the north.