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Iraqi downstream dreams edge closer to reality DinarDailyUpdates?bg=330099&fg=FFFFFF&anim=1

Iraqi downstream dreams edge closer to reality

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Iraqi downstream dreams edge closer to reality Empty Iraqi downstream dreams edge closer to reality

Post by GirlBye Fri Oct 02, 2020 4:55 pm

Iraqi downstream dreams edge closer to reality Iraq-banner

Refining and petrochemicals development may finally be gathering momentum

Baghdad has developed an unenviable reputation for a gulf between downstream promises and reality. For some 13 years, successive governments have announced—and often re-announced—an array of greenfield refining projects, yet only a single new facility is ­under ­construction.

Even that is running more than five years behind schedule. In petchems, majors expressed interest as far back as the early years of last decade, before domestic consumption took priority over feedstock in allocating scarce gas supplies International investors have been unwilling—due to a combination of persistent political instability and oil prices that have never fully recovered from their 2014 slump—to make the multi-billion-dollar capex commitments required. Successive governments have also been unable to finance schemes.

So there is understandable scepticism about recent Iraqi oil ministry announcements—notably without putative foreign partner corroboration—that Italy’s Eni had agreed to a 300,000bl/d greenfield refinery at Basra province’s giant Zubair oilfield, and that Shell had resumed discussions on the same area’s eight-year-old Nebras petchems project.

Oil minister Ihsan Ismael said in early September that a c.$4bn 150,000bl/d Zubair first phase could be onstream by 2025. Before his June drafting into the newly formed government, Ismael was head of state-owned Basrah Oil Company, which owns just under a third of the Zubair concession, so he has relevant experience of the field’s potential development plans.

But, given the Italian firm’s silence thus far and its intentions to slash capex, prospects for imminent progress appear slim. And Baghdad has form for yet-to-fly southern Iraqi refining projects; plans for a 300,000bl/d plant at the Al-Nasiriyah oilfield in neighbouring Dhi Qar province have re-emerged in various forms since 2012, while two Chinese parastatals agreed to develop a similar-size facility on Basra’s Al-Faw peninsula in 2018.

But this summer did see progress on long-standing plans to upgrade an existing 210,000bl/d refinery near Basra City. Japanese engineering firm JGC signed a $3.8bn contract to install several new units—including Iraq’s first fluid ­catalytic cracker.

Crucially, the project is being part-funded by the Japan International Cooperation Agency— which may spare it some of the financing problems that have dogged the 140,000bl/d Karbala refinery, the sole newbuild under construction. Karbala’s completion—by a South Korean consortium under a 2014 contract—is now tentatively scheduled for 2022.


Repairs are also slowly but surely progressing at the Baiji refining complex—once the country’s largest but left in ruins by the mid-decade depredations of Islamic State—in northern Salahuddin province. A second 70,000bl/d unit is due back onstream by year-end, according to the oil ministry. Rehabilitation work has also started at the badly damaged 170,000bl/d main plant.

Iraq’s refining capacity stands at ­c.760,000bl/d, according to Opec statistics, narrowly exceeding consumption. But shortages persist in key products, forcing the state treasury to resort to expensive imports. Domestic fuel supply remains the authorities’ overriding downstream priority.

Power generation fuels are also a key concern for an administration aware that anti-government protests sparked by blackouts pre-date by some time the unrest that toppled the prime minister last year.

Gas-for-power will thus remain the prime motivation for the Shell-led Basrah Gas Company, which has a mandate to process otherwise flared gas from the Rumaila, West Qurna 1 and Zubair oilfields and which, as of last year, is producing more than 1bn ft³/d (28.3mn m³/d). But Shell agreed in 2012 to conduct a feasibility study on a proposed 1.8mn t/yr Nebras ethane cracker and derivatives complex in the oil-rich southern province, signing a heads of agreement develop the plant three years later.

Little had been heard of the project until late August, when the oil ministry declared the scheme a priority and pledged contractual and legal agreements by year-end. The government promises to guarantee ethane feedstock availability throughout the plant’s life.
Shell has, again, said nothing. But ethane may now be available in sufficient volumes to support the project, while the prospect of the new administration ushering in greater political stability has at least not yet been dashed.

Chevron, Total and Russia’s Lukoil are among other heavy hitters to have previously recognised Iraq’s world-scale petchems potential. And, as with elsewhere in the region, downstream projects offer value-added exports, a more diversified economy and jobs for a potentially restive populace. Now might finally be the time when the downstream stars align to fulfil some of those promises.

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