Iraq’s oil industry aspirations mired in fiction

Of late there is even talk of Iranian funding to get some projects off the ground

Gulf News

For a long time I deliberately refrained from commenting on the oil and gas scene in Iraq. Sadly, I feel the professional comments of many Iraqi industry experts have gone awry and never taken positively by the government.

We are in 2017 where Iraq crude oil production was supposed to be more than 12 million barrels a day (mbd); crude oil refining capacity was supposed to be over 1.5 mbd; petroleum product specifications are in line with the best; and flagrant gas flaring is no more.

Money was there ... at least before 2015 and supposedly Iraq had the support of the whole international oil industry.

But none of the aims have materialised, because they were not realistic as was the case with the crude production target, or there was an over-reliance on private capital support for the refining industry, or due to the corruption and mismanagement that the domestic industry became famous for since 2003.

However, an article in NewsBase publications deserves comments.

On February 1, the “Downstream Middle East and Africa” said: “Iraq’s Ministry of Oil [MoO] is currently assessing options for the expansion of its petrochemicals sector.” But this is not an announcement by the MoO, since the responsibility for the petrochemical sector belongs to the Ministry of Industry and MoO is only the supplier of feedstock.

The announcement came from “a senior oil and gas industry source who works with the oil ministries of Iraq and Iran”, who said the “Ministry is working on detailed plans to make the sector less fragmented from the bottom up, with help from Iran, and we should see some major developments in this field in the coming months”.

How nice that Iran is helping Iraq to become one of its competitors.

Reliance on imports

After 14 years since the invasion and occupation of Iraq, I look forward more to the rehabilitation of the first petrochemical plant in Basra rather than promises. I also would like to ask why was the great petrochemical plant that was supposed to accompany the Central Refinery — now Karbala Refinery — was cancelled.

The “senior source” then ventures on the refining industry admitting it “left Iraq being reliant on imports for around 30 per cent of its gasoline and 17 per cent of its LPG requirements, and missing out on much-needed income from high-value petchems products.”

I don’t know about these percentages, but for many years Iraq imported close to 100,000 barrels a day of light products. The four new refineries announced in 2010 are still nowhere to be realised except that Karbala refinery is under construction. But payment to contractors are a trickle and so is the progress, though the “source” says it will be commissioned in 2019 and not in 2020 as scheduled.

Surprisingly, the Ministry announced the sale by the end of this month of a package of information and conditions for companies interested in refinery investment, a route that has proved be hopeless before.

All this time Iraq only added three distillation units, two in Daura and one in Basra and another in Basra under construction, all without adequate supporting units to produce acceptably marketable products. Small distillation units were also built to satisfy the ego of some local governors rather than integrating the industry.

But the source is also talking about a plan that “extends through 2020 and involves the construction of 12-13 new refineries, with total nameplate capacity of 1.425-1.530 million bpd.”

If this is true, then it can only mean many small distillation plants around the country, which may have been justified 30 to 40 years ago but are totally outmoded now.

Useful project

The cracking unit in Basra, an excellent idea, is supposed to be financed by Japan International Cooperation Agency. It is not yet tendered, though it has been on the agenda for probably 10 years and no one knows why the delay in what was supposed to be a straightforward useful project.

A worrying point is the lack of any statement as to the fate of Baiji refinery which was heavily damaged by Daesh and the ensuing battle to retake it by the army. News continues about the pillaging of equipment and warehouses by militias. The silence of the Ministry and the Government does not bode well for Iraq largest and most expensive plant.

The “source” concludes by saying that “the onus being on dramatically increasing the output of Euro-4 Standard gasoline, which will see Iran share its expertise in terms of necessary plant configurations.”

How wonderful that Iran is to teach the Iraqis something that they have known for decades.

The writer is former head of the Energy Studies Department at the Opec Secretariat in Vienna.

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