Iraq's refineries are undergoing a nation-wide turnaround programme to raise output by a quarter as oil product imports help meet demand, the official in charge of the overhaul said on Friday.
Senior oil ministry adviser Ahmad al-Barifkani told Reuters that Iraq's refining capacity would rise to 600,000 barrels per day (bpd) after the one-year plan, which covers around a dozen major and smaller refineries.
"This should bring us close to operating at capacity," Barifkani said.
He said around one crude distillation unit will be taken down per month to retain capacity in the system and avoid shortages that have plagued post-war Iraq until recently.
One of several 20,000 bpd crude distillation units at the Dora refinery on the edge of Baghdad is already being overhauled and the main 150,000 bpd unit at the Baiji refinery further north will be taken off line next month.
"The Baiji unit has not been maintained in 20 years and the rest of the system is in similar condition," said Barifkani.
Halliburton, the Texas company that was awarded most of the US contracts to repair Iraq's oil industry, will help in the repair, which will be also funded by the oil ministry.
The ministry is preparing to issue a tender to equip the Baiji refinery with valves and other equipment as domestic financing becomes available to repair the oil infrastructure, according to an industry source.
An explosion from a gas leak last week killed one Czech engineer at Baiji and injured several others.
Iraq' post-war demand for gasoline and high sulphur gas oil has been rising as hundreds of thousands of cars enter the country and people facing power shortages buy generators.
Iraqi refineries are processing 475,000 bpd, compared to 1.9 million bpd of exports. Output sometimes changes because saboteurs target pipelines.
Gasoline production is running around 12 million litres a day compared to demand of 16 million litres.
The US army and Iraq's State Oil Marketing Organisation have been importing gasoline from Syria, Jordan, Turkey and the Gulf to plug the output gap.
But the highway linking Baghdad to Amman and Damascus has been closed this week as US forces fight Sunni Muslim guerrillas. Traffic at the northern Zakho border crossing is also not running smoothly.
International companies have proposed projects to the ministry to ease import bottlenecks, such as building storage tanks on the Turkish border and a new products terminal at Khor al-Zubeir on the Gulf.
Iraq also imports gas oil with domestic output at 10 to 13 million litres a day versus demand of 16 to 18 million.
In contrast, liquefied petroleum gas output has recovered to 2,500 tonnes a day, enough to meet the country's needs.
Demand for kerosene fell since winter and resources to refine the product were diverted to produce gas oil.
"We no longer have kerosene shortages. Providence was on our side this time. Winter was not severe," Barifkani said.
Iraq, Barifkani said, would need investment to build new refineries in the long-term to meet demand, and reconsider its subsidies policy.
Gasoline sells for around one cent a litre, encouraging smuggling to Jordan, Turkey and Syria, where the product is much more expensive.
The Iraqi government and its US rulers spend billions of dollars a year subsidising oil products.