Iraq has a total oil refining capacity of approximately 600,000-bbl/d. There are eight refineries across the country and they were not damaged during the 2003 war. The largest refineries are Baiji, with a capacity of 310,000-bbl/d, Basra with 150,000-bbl/d and Daura with 110,000-bbl/d.
Back in 2005, all the refineries were operating at a capacity of 50 to 75 percent and were unable to cover the country’s oil needs. This is why Iraq was forced to import about 200,000-bbl/d of refined oil, costing the country an estimated $200-250 million a month.
Subsidies imposed by governments on consumer prices cost Iraq another $800 billion a year. They also acted as an incentive for illegal trading of Iraq’s oil, which further accentuates shortages inside the country. Reducing dependency on oil imports is an important issue for the Iraqi economy. In order to do so there are significant investments to be made in refinery upgrades and the building of new plants.
Two small firms from U.S. and the Czech Republic, Hydrocarbon Supply Ltd and Prokop, were awarded a $110 million contract in 2005 to upgrade the Daura plant. Capacity was to be increased by 60,000-bbl/d. Also in 2005, Iraq announced that a new refinery would be built in Basra and received bids from eight companies for the completion of this project.
By the end of 2005, construction had begun on two plants, one in Karbala with a capacity of 140,000-bbl/d and another in Diwaniya with 30,000-bbl/d. The two refineries cost about $1.5 billion and $300 million respectively and were two be completed by the end of 2008.
Despite having the third largest oil reserve in the world, it was only in 2009 that Iraq reached a stage where its refineries produced enough gasoline to cover the country’s domestic needs. The government has a $50 billion plan to overhaul the industry and boost oil production. As part of this strategy, Iraq signed contracts with several international companies.
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Article may be reprinted online and offline as long as
this box remains and hyperlinked online. Written by
Darren Chabluk for http://DrDinar.com/blog
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