Iraq will require up to $25 billion in investment to expand its refining capacity over the next five to seven years, an Iraqi oil official said on Saturday. Dathar al-Khashab, director-general of the state-run Midland Refineries Co, said that estimate included expanding Iraq's five existing refineries and building four refineries, as well as the cost of crude pipelines, product pipelines and depots.
"The huge surge of prices in construction costs means this figure could be moderate," he said on the sidelines of a conference in Dubai. "This could be done from internal financing and the other way is through joint ventures, inviting international companies to come in and offering a lot of incentives to do so."
Iraq has the world's third-largest proven oil reserves but its refineries have suffered from a decade of sanctions and four years of violence since the US-led invasion of 2003, which has hampered investment. In 2002, Iraq had total installed refining capacity of some 590,000 bpd, operating at 90-95 percent, Khashab said. The refineries were operating at 60 percent in 2005, when Iraq suffered a gasoline shortage of 10-12 million litres, he added.
While that has eased, Khashab said, demand was likely to rise again if the security situation improves. The shortages have already resulted in a thriving black market in fuel.
Khashab said each of the existing refineries, would cost $1.5 billion to expand. Plans were also afoot for the construction of a new 300,000 bpd refinery in the southern city of Nassirya and three 150,000 bpd refineries in Amara, Kerbala and Kirkuk, though the projects are mostly still at the consulting stage.
"The one in Kerbala we have done some engineering on and the FEED package is going to be tendered in the next few weeks," he said. "We are having problems with the new pricing. The main thing that is hampering us is the misunderstanding from companies... It is not like before. We are now transparent."
Some foreign companies have been wary of entering Iraq amid daily violence, a lack of transparency and a legal vacuum in some areas. Many international oil companies are awaiting the passage of a new federal oil law that will regulate the sector. The much-anticipated bill has been approved by the government after months of talks but has yet to be passed by Iraq's parliament.