Iraq’s downstream sector has been largely unable to catch up with its recent upstream development. Despite rising population growth, substantial growth in passenger vehicles, growing middle distillate demand, and the increasing use of gas over fuel oil for power generation, Iraq’s refining capacity and complex has barely increasing from pre-2003 levels.
The lion’s share of Iraq’s refining complex was built pre-2003: the country’s first hydro-skimming refinery was Daura (1955), and the Basra refinery and Baiji complexe were built in the 1970s and 1980s, respectively. All of Iraq’s refineries are simple hydro-skimming refineries with high fuel oil surpluses of over 50% average yields.
Federal Iraq’s current refining capacity, post ISIS war damage, stands at around 650,000 b/d and refinery runs are between 550,000-600,000 b/d. Plans to double the country’s capacity in 2010 to 1.5 mb/d by 2021 have been unmet and at the current rate a more realistic projection is that Iraq will reach a capacity of 800,000-1 mb/d by 2021. Some of the projects under way include the 140,000 b/d Karabala refinery being constructed by Hyundai, Basra refinery expansion (add details) and the restarting of the 70,000 b/d Salahaddin-1 unit at Baiji refinery complex.
Despite delays other refinery investment projects have faced in the past, the country has recently taken serious steps to attract foreign investment, amend the investment law to improve IRR’s, and recently passed a Council of Ministers’ decision to invest up to 15% in key refinery projects, thus expressing the country’s commitment. Moreover, as Iraq’s incremental crude oil production profile gets heavier, IMO 2020 new sulphur regulations and other environmental regulations take effect, Iraq is aware that it will urgently need to upgrade and expand existing refineries and build new compliant ones.
Future Plans
The Ministry of Oil currently has an optimistic target production level of 6.5 mb/d by 2022. This would be dependent on achieving higher water injection rates, midstream and export capacity upgrades and expansions. This is particularly relevant as the country’s production profile is set to get heavier as more oil comes from the Mishrif horizon. Maybe change wording around
Iraq has recently reached key preliminary terms with ExxonMobil and PetroChina on a project that will be crucial for the country to reach its latest production target of 8 million b/d in the next five to seven years. The South Integrated Project, which leverages the development of two fields in southern Iraq, Nahr Bin Umr and Ratawi, to pay for gas plants at the two fields, a multi-field water injection project to boost much needed reservoir pressure, and repairs and upgrades to storage, pipelines and export infrastructure, would be a core driver of production and export growth.