The UAE’s Al-Ghurair Investment is to modernise Libya’s largest oil refinery, Ras Lanuf, in a deal worth up to $3bn, via two subsidiaries.

The cost, 50 per cent higher than previous estimates, will be finalised in the summer.

Negotiations are also under way for a makeover of the country’s second-largest refinery, Azzawiya, which could cost a further $2bn.

Al-Ghurair subsidiaries Trans-Asia Gas International and Star Petro Energy, known as the Star Consortium, signed a framework agreement on 7 January to rehab-ilitate and upgrade the Ras Lanuf refinery.

Under the deal, the consortium will join the state-owned National Oil Corporation (NOC) in a 50:50 joint venture. “Now the framework agreement is in place, we will start working on detailed agreements,” says Ahmed Aoun, head of projects at NOC. “There will be nine in total, including a crude oil supply agreement, a plant acquisition agreement and a joint venture agreement. We expect them to be concluded by July.”

Once a joint venture company is formed, NOC will transfer ownership of the refinery to the company, while Star Consortium will invest an amount equivalent to the refinery’s value.

“It is an open question how much it [Star Consortium] will invest,” says Aoun. “But we expect it to be in the region of $3bn.”

Unlike similar modernisation deals with the US’ Dow Chemicals and Norway’s Yara International to upgrade petrochemicals infra-structure, the international partner will take a share of the revenues from the refinery immed--iately, rather than wait until the upgrades are completed.

The modernisation scheme will be carried out in two phases. One will restore the refinery’s original 220,000 barrel-a-day (b/d) capacity. It currently produces less than 200,000 b/d.

The other will upgrade the plant to enable it to convert fuel oil into lighter products.

“We are flexible as to the exact configuration,” says Aoun. “Libya is short of gasoline, so the product will be sold on both domestic and international markets.”

Feasibility studies are likely to delay the start of work on the upgrades. “It will probably be two to three years before we can start implementing,” says Aoun.

The Star Consortium beat two unidentified international companies to develop the refinery under a closed tender process that began in mid-2007.

Talks are under way with international firms to sign a similar framework agreement for the modernisation of the 120,000 b/d facility at Azzawiya.

“We are in negotiations with a number of companies,” says Aoun, who declines to name the firms.