12 September 2006
Iraq is embarking on new projects to add refining capacity and build new pipelines, in a bid to meet domestic fuel needs, insure stable exports from northern oil fields, and raise overall export capacity to 3 million barrels per day within the next five years, according to Iraqi Oil Minister Hussein al-Shahristani.
Baghdad has revived refinery upgrade plans that were tendered in several packages over the past two years, and is currently analyzing some bids received from foreign companies. The tenders involved adding two new crude units of 70,000 b/d each to its Daura refinery in two stages, a 70,000 b/d expansion upgrade of the Basrah refinery, and construction of two new grassroots refineries — a 70,000 b/d plant at Koya in the north and a 140,000 b/d refinery at Nahrain in central Iraq.
“We are going through the technical bids for the upgrading projects and soon we will move on to the commercial bids,” al-Shahristani told International Oil Daily in Abu Dhabi Sunday.
“We are aiming to sign all the refinery upgrades in 2007 and then we will move on to negotiations with the companies bidding for Koya and Nahrain,” he added.
Another major refining project for the future involves a 300,000 b/d grassroots refinery in Nassiriyah, southern Iraq, but al-Sharistani said this is a longer term project targeting product exports, and so is not a priority now.
“The projects under consideration will raise Iraq’s refining capacity to over 1 million b/d within the next five years,” al-Shahristani said.
Current refining capacity is around 600,000 b/d, but runs are lower due to power shortages, pipeline sabotage and other problems.
The Iraqi legislature last week approved a bill to liberalize the gasoline import and distribution sector, opening it to the local and international private sector, in a bid to solve severe fuel shortages. Al-Shahristani said his ministry would grant licenses to any company, on condition that it provide guarantees that gas stations comply with security and environmental regulations.
Imported gasoline must also be above 91 octane in quality, “to clearly distinguish it from the locally produced fuel which will still be subsidized and to avoid internal smuggling whereby local produce is sold at import prices,” al-Shahristani said.
“We still have not received any applications from companies interested in importing gasoline but once we get requests we will process them within a week,” al-Shahristani said. The bill is still awaiting approval by the presidency council before being published in the official gazette.
Baghdad is also reviving old projects to increase production from existing wells, with the aim of raising output capacity to 4.3 million b/d and export capacity to at least 3 million b/d by 2010, al-Shahristani said. “This will be done by our own Iraqi companies. It’s mostly workover and drilling new wells and using new techniques such as submersible pumps in the Rumailah fields,” the minister said.
In the near term, the oil ministry is focusing on stabilizing exports through the northern Kirkuk-Ceyhan pipeline, where transportation has been paralyzed for most of the past three years. A new link to the Kirkuk-Ceyhan pipeline is being built and is expected to be operational within a few weeks, al-Shahristani said.
“It’s a line that has a 500,000 b/d capacity that will run from Kirkuk to Baiji without going through the area where most of the attacks have been focused, before linking up to the old Baiji-Ceyhan section,” the minister said.
Insurgents’ and saboteurs’ attacks have been concentrated around the Fatha bridge intersection north of Baiji, where pipelines run mostly above ground. The new underground line would be more difficult to blow up. Security would also be enhanced by deploying the Iraqi military to protect the pipelines, al-Shahristani said.
A new pipeline to carry crude directly from the Kirkuk fields north to the Turkish Ceyhan terminal on the Mediterranean, without a supply line to Baiji, is also on the drawing board, the minister said. This could replace the old twin lines linking Kirkuk to Ceyhan, which are “old and used up,” according to al-Shahristani.
The Kurdistan Regional Government is also looking at pipeline export routes from northern Iraq to Ceyhan, to carry crude from two field developments expected to come on line early next year.
The new Kirkuk pipeline being considered by the Iraqi oil ministry could run to Kurdistan and then on to Ceyhan.
Iraq’s State Oil Marketing Organization (Somo) on Monday said it had cut sales of Kirkuk crude to 1.6 million barrels from a tendered 6 million bbl, after it failed to pump enough volumes to storage tanks at Ceyhan due to sabotage attacks, according to wire reports. The first 1 million bbl was awarded to Turkey’s Tupras, with the remaining 600,000 bbl still pending.
Al-Shahristani was in Abu Dhabi to attend UN- and US-led meetings to prepare for Sep. 18 summits in New York and Singapore to discuss political reforms and financial support in Iraq. The minister said that raising exports to 3 million b/d in a few years would guarantee Iraq some $60 billion per year in revenue, assuming oil prices are in the $50-$60 range.
He said a new hydrocarbon law under discussion by a ministerial committee aims at “securing Iraq’s benefit from the resources it owns, while guaranteeing the rights of foreign investors in developing Iraqi oil fields in the shortest delays possible, to achieve an output capacity in line with its reserves.”
By Ruba Husari, Abu Dhabi
(Published in International Oil Daily Sept. 12, 2006)