Japanese home in on southern deals

12 May 2006
Japanese consortiums have completed two feasibility studies for the Oil Ministry covering the redevelopment of a master gas network in the south and the upgrade of the Basra refinery. Both projects are now entering the next design stage, although implementation will only begin once an agreement between Baghdad and Tokyo is concluded and the security situation improves.
The more advanced of the two projects is the estimated $1,000 million Basra refinery upgrade, where Toyo Engineering Corporation and Mitsui & Company have started work on the front-end engineering and design (FEED) contract in conjunction with South Oil Company. In addition to improving the refinery's product slate and specifications, the upgrade calls for increasing the refinery's design capacity to 300,000 barrels a day (b/d) from 140,000 b/d. The existing refinery, which comprises two trains, was originally built by Czech and Japanese firms. A technology licensor has still to be selected.

The second completed study the liquefied petroleum gas (LPG) gas value chain reconstruction in the south aims to rehabilitate and enhance the existing gas network in the south. A Japanese consortium, made up of Chiyoda Corporation, Mitsubishi Heavy Industries (MHI), Mitsubishi Corporation, JGC Corporation, Tomen Corporation and Toyo, have now been asked to refine the study in an attempt to reduce costs.

'The Iraqi government has asked us to phase the project and highlight which areas are priorities,' a source close to the project told MEED at the Rebuild Iraq 2006 conference in Amman on 9 May. 'We have to define it and hope to do this by the summer.'

Various elements of the network, including gas-gathering, processing facilities and storage tanks, were completed in the 1980s by the likes of Toyo, MHI, Chiyoda and Paris-based Technip. However, the network was heavily damaged during successive wars and has suffered from chronic underinvestment.

The estimated $3,000 million redevelopment covers three distinct areas: rehabilitation and upgrade of existing facilities; utilisation of flared gas; and development of unexploited gas fields. Iraq has estimated gas reserves of about 110 trillion cubic feet, but the sector is relatively undeveloped, with most associated gas flared.

Tokyo has promised $3,500 million in funding for the reconstruction effort, some of which will be allocated to the schemes. The majority of funding is likely to come from concessionary loans from Japanese development banks. In return for its financial commitment, Tokyo will sign oil and gas offtake agreements with Baghdad.

'We are now finalising how to implement the projects,' says the source. 'Once we do, we will propose them to the Japanese government, which will then have to agree with the Iraqi government. Once they both reach agreement, then we will have permission to begin construction work in Iraq.'

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