Iraq Seeks to Triple Refining Capacity With Slew of Projects

(Bloomberg) -- Iraq, the world’s third-biggest crude exporter, plans to triple refining capacity by 2021 to shake off its reliance on refined-product imports.

Processing capacity will increase to 1.5 million barrels a day from just over 500,000 now, not including Iraq’s semi-autonomous Kurdish region, Deputy Oil Minister Fayyad Al-Nima said in an interview in Baghdad. The country spends more than $2 billion a year importing gasoline and gasoil, he said.

Previous plans to expand refining have faced setbacks and delays, even outside the regions beset by militancy. Back in 2012, the government said Iraq would reach processing capacity of 760,000 barrels a day by the start of the following year. That goal was missed, and the crude-market rout that began in 2014 further squeezed government funds.

Planned plants include a second refinery in Basra, though the bidding deadline for the 300,000 barrel-a-day facility has been deferred by three months as additional companies expressed interest, Al-Nima said. In Kirkuk, bidding has closed on a proposed 70,000-barrel plant, and a decision will be announced this month. In Nasiriya, two Chinese companies are in talks on a 150,000-barrel facility. Iraq will also soon announce a tender to upgrade existing refineries in Basra and Daura, he said.

At Karbala, delays have hampered a project to build a 140,000-barrel-a-day refinery, contracted to Hyundai Engineering & Construction Co. The government is paying Hyundai in crude oil as its seeks $2 billion in loans to cover the plant’s funding shortfall.

The country is also looking to acquire processing capacity overseas, not only boosting its production of fuels but opening up markets for Iraqi crude. The government is in talks with China and Oman to invest in refineries and depots and plans similar discussions with Singapore and Indonesia, Al-Nima said.

Iraq is working to boost crude capacity even as it agrees to trim output under a deal with the Organization of Petroleum Exporting Countries. The country aims to raise capacity to 5 million barrels a day by the end of the year, Oil Minister Jabbar Al-Luaibi said at the producer group’s meeting in Vienna last month. Iraq can pump as much as 4.7 million barrels a day, according to data compiled by Bloomberg.

“Iraq’s output is increasing day by day and we need markets and foreign refineries and foreign depots,” Al-Nima said.

--With assistance from Sam Wilkin

To contact the reporters on this story: Khalid Al-Ansary in Erbil at kalansary@bloomberg.net, Kadhim Ajrash in Baghdad at kajrash@bloomberg.net.

To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Alaric Nightingale, Brian Wingfield