An Italian consortium will build and operate a
200,000-barrels-a-day refinery in central Iraq
as part of a drive to boost fuel supply, the country's deputy oil minister said
Tuesday.
Ahmad al-Shammaa told Dow Jones Newswires the preliminary agreement is valid
for six months, during which time the consortium should make progress on
securing finance and equipment to build the project in Kerbala province, some 100 kilometers south
of Baghdad.
The joint venture, named as Refinery of Kerbala Corporation Ltd., includes
Italy's Saipem SpA, a large financial institution, and ex-Eni SpA (E)
executives, Shammaa said.
"After six months if they prove to be serious and they have made progress
in securing financial, technical and equipment suppliers, we will sign with
them a final contract to build the refinery," he said.
The project will be carried out on the basis of build, operate and own and is
estimated to cost around $6 billion. Construction is expected to take around
four years, Shammaa said.
The new Iraqi investment law allows foreign companies to invest in the Iraqi
downstream sector. The law exempts investors from taxes and customs for 10
years. It also gives a discount of 5% to Iraqi crude oil prices to investors in
refineries in Iraq.
Shammaa said that the government would supply the refinery with crude oil and
buy the products from the venture for the first 10 years or until it recovers
costs of building the project.
The front-end engineering and design for the Kerbala refinery was carried out
by Technip SA.
Iraq
also plans to build three more refineries. One in Missan province with a
processing capacity of 150,000 barrels a day, another in Kirkuk with a capacity
of 140,000 barrels a day and a third in Nassiryah with a capacity of 300,000
barrels a day.
Shammaa said the ministry is expected to sign shortly a similar agreement with
a consortium that includes Czech, Turkish and Iraqi companies to build Missan
refinery in southern Iraq.
U.S. companies Shaw Group Inc. and Stone & Webster Inc. have designed the refinery.
Iraq
has three aging refineries in Baghdad, Basra and Baiji 200 kilometers north
of the capital, as well as a scattering of smaller refineries throughout the
country, with designed capacities of 750,000 barrels a day. But outstanding
repairs, crude transport bottlenecks, acts of sabotage and crude oil storage
capacity cut their operational capacity to around 550,000 barrels a day.