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Iraq needs $30bn refinery investments

21 Mar 2012, 6.20 pm GMT

Iraq needs $30bn refinery investments

Dubai, 21 March (Argus) — Iraq's refining sector is in pressing need of extensive rehabilitation, modernisation and conversion, and needs new refinery projects to start immediately, an expert on the country's oil markets told an Argus conference today.

Saadallah al-Fathi said the country requires total “fast-track” investment of up to $30bn in the refining sector. Iraqi refineries have suffered three wars and 13 years of economic sanctions, and “repairs have been modest at best and little fresh investment was made either by the government or the private sector,” he said. Refinery utilisation rates have been at 50-65pc since 2003 and are not expected to rise before major rehabilitation and repairs take place, al-Fathi said.

Al-Fathi is a former head of the energy studies department in the Opec secretariat in Vienna and currently adviser to Dome International Petroleum, an oil market development consultancy and trading company that specialises in Iraq. He was speaking at the second Argus Mideast Gulf and Indian Ocean Oil Conference in Dubai.

“There is an urgent need to start new refinery projects,” al-Fathi said. But out of the four refinery projects being planned, only the 140,000 b/d Karbala project will probably see the light of day, he said. France's Technip has completed the design work for the $5bn refinery. Among the other projected refineries are a 300,000 b/d facility in Nassiriya and two 150,000 b/d refineries in Kirkuk and Misan.

Al-Fathi said there has been no success in the past few years in getting direct government budgetary allocation for the refinery investments because of political problems. No joint ventures with foreign companies have been formed, and there is no interest in private-sector ownership, he added. Proposals for loans on a government-to-government basis are proceeding very slowly, he said. He said the government has to step into the refinery sector urgently as private-sector participation is very difficult to find.

Al-Fathi said the grim state of the Iraqi refining sector is reflected in the fact that the country's domestic gasoline specification had fallen to 81 Ron from 91 Ron in 1990. And domestic gasoil quality has fallen, with sulphur content rising from 0.2pc to 1pc.

And he predicted that Iraqi imports of oil products “will be much more” than Baghdad's estimate of 4mn-5mn t in 2012-14.

The Iraqi government last year revised its forecast production and consumption of oil products for 2012-14. According to this forecast, gasoline production is expected to increase to 95,000 b/d against total consumption of about 142,000 b/d. Gasoil production will rise to 140,000 b/d against consumption of 134,000 b/d, while the corresponding numbers for jet fuel are projected at 68,000 b/d and 62,000 b/d, respectively. Al-Fathi termed these estimates “wishful thinking” on the part of the government.

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