Iraq seeking investors for 4 new oil refineries

http://www.businessweek.com/ap/financialnews/D9GJ1HLO2.htm

By SINAN SALAHEDDIN

BAGHDAD

Iraq is seeking investors to help build four oil refineries at an estimated cost of $23 billion that would more than double the country's current refining capacity, the country's top oil official said Saturday.

Iraq's oil minister said partners who will build and run the refineries will have 5 percent discount for buying crude -- a recent concession to attract investors. The projects will also be exempt from state taxes and the government will not interfere in pricing the oil products once the plants are operational, Hussain al-Shahristani told a gathering of local and international oil executives in Baghdad on Saturday.

"I encourage all investors to seriously think about investing in this promising sector as I do believe that it guarantees profits better than other places," al-Shahristani said.

The processing capacity of the four refineries is expected to be 740,000 barrels per day.

Although the capacity of Iraq's 11 existing refineries stands at about 700,000 barrels per day, the country processes only about 550,000 barrels a day due to years of war, neglect and international embargo.

The largest new refinery will have a capacity of 300,000-barrel-a-day and will be built in Nasiriyah province in southern Iraq at an estimated cost of $8 billion.

The Swiss engineering and construction contractor Foster Wheeler AG is conducting the feasibility study and design and is expected to be completed in the first quarter of 2012.

Two other refineries with a processing capacity of 150,000 barrels-a-day each will be built in Maysan province in the south and in the northern oil-rich city of Kirkuk at a projected cost of $5 billion each.

US engineering firm Shaw Group is conducting the feasibility study and design for Kirkuk and Maysan refineries which will be completed by the end of end of 2011.

The fourth one with a daily capacity of 140,000 barrels will be built in Karbala, just south of the capital. Its feasibility study and design by the French oil services company Technip SA is expected by the end of this year.

In 2007, Iraqi parliament approved a law for the private investment in crude oil refining to allow foreign or local firms to build and operate domestic refineries. Iraq first offered one percent discount on the supplied crude, but last month the cabinet increased its offer to 5 percent to attract more foreign investors.

"It's great and more than enough and very encouraging," Yousif Abdul-Malik, the representative of the Swiss Veron Consulting AG said of the new discount percentage. "This was the major obstacle in the way of the foreign investors," Abdul-Malik told The Associated Press at the sideline of the conference.

Al-Shahristani also said the current oil prices, fluctuating between $70 to $80 are "acceptable and balanced in the oil market."

On Friday, benchmark crude for August delivery rose $2.35 to settle at $78.86 a barrel in on the New York Mercantile Exchange.

Iraq sits on the world's third-largest known oil reserves with an estimated 115 billion barrels, signed a dozen of deals with international oil companies with an aim to reach an output capacity of 12 million barrels a day within seven years from the current daily production of about 2.4 million.

Analysts say those estimates are too ambitious.