Iraqi officials question plans for new refinery

26 February 2014

Local KAR Group to build and operate 90,000 barrel a day facility

Senior Iraqi oil officials have questioned the feasibility of a new refinery planned for the north of the country by the Ninewa provincial council.

The local KAR Group is expected to sign a contract with the council for the construction and operation of a 90,000 barrel a day (b/d) refinery in the province, but the deal has faced opposition from the federal government.

“I am not sure how serious these plans are,” said Thamir Ghadban, a former Iraqi oil minister and chairman of the prime minister’s advisory committee, speaking on the sidelines of MEED’s Iraq Energy Projects conference in Dubai.

The deal was announced by the provincial governor Atheel al-Nujaifi on 24 February, but there are numerous questions which have not been addressed.

“Where is the feedstock going to come from? If it is from Khurmala Dome, is the KRG [Kurdistan Regional Government] prepared to sell it to them cheaply, below market rates?”, asked Ghadban. “In the federal government, we sell crude to refineries at $3 a barrel. Will they do that? And how will they get the crude to the refinery? By pipeline?”

The federal Oil Ministry’s plan for Iraq’s downstream development includes a new refinery in the province, but the Ninewa authorities have moved ahead independently to address the province’s fuel shortages.

There is currently a 20,000 b/d refinery in the Qayyarah area, which was built in 1955 and is operated by state-owned North Refineries Company. Most of its units have been out of operation since the mid-1980s.

“We are not ready to wait for decades until crude runs out from the south to start energy investments in Ninevah province,” the governor of Ninevah, Atheel al-Nujaifi, told reporters in October.

The new refinery, which will be built at the town of Hamdaniya, near the city of Mosul, will also include a 300MW power plant. It will be built in two phases, with the first 60,000 b/d train expected to be completed by July 2015. KAR currently operates the 80,000 b/d Erbil refinery in the semi-autonomous Kurdistan Region.

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