Iraq Struggles To Restart Damaged Refineries By
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Posted On: 08/31/2020 5:37:39 PM
Iraq Struggles To Restart Damaged Refineries
By Viktor Katona - Aug 31, 2020
Still struggling to overcome the draining consequences of almost ceaseless conflict and political haggling, Iraq has nevertheless managed to overcome the worst of the 2020 oil market slump in its upstream sector. It demonstrated sufficient subtlety with its Kurdish exports and has more or less reined in its OPEC+ non-compliance antics, to avoid the ire of leading crude exporters. Yet as Baghdad and other Iraqi cities put up with the intense August heat when temperatures are routinely above 45 °C, Iraqi authorities have started to chart a pathway for the Arab nation’s downstream segment, too – albeit a bit too ambitious given the conditions of today’s Iraq; one might argue that staying realistic is the best Baghdad can do. Iraq’s only fully functional refinery is located in Shuaiba near the Basrah hub of crude production, where a 210kbpd refinery is serving the product needs of the south. Under normal circumstances, Shuaiba should have processed some 280kbpd, using a fourth refining unit, however the realities of being an oil-dependent war-torn Middle Eastern nation and the COVID pandemic have gotten in the way. Shuaiba has had its fair share of difficulties in the past years as the river water it relies on is becoming increasingly salinated and was forced to temporarily shut down refining because of that – might not seem that tragic in the COVID-19 era when demand for fuels has plummeted but definitely was a dangerous development before that given all the missing output from the Baiji Refinery.
While the Shuaiba Refinery caters for the products need of Iraq’s South and the 140kbpd Daura Refinery is feeding the exigencies of the burgeoning Baghdad market, the ill-fated Baiji Refinery (some 130km from Baghdad) was satisfying the needs of the nation’s heartland. Yet Baiji has suffered immensely on the back of plentiful military operations – first it was damaged by ISIS’ barbaric actions, only to take another hit when the Iraqi internal forces recaptured it in 2015. Last week the Iraqi oil ministry has set a deadline to the completion of the partially destroyed 310kbpd Baiji Refinery complex, one of the most badly damaged key infrastructure assets during the Islamic State sudden onslaught on Iraq.
Related: The Innovative Solution Bringing Electricity To Crisis Stricken Areas
Nominally, Baiji consists of 3 different parts – Salahuddin 1 and 2 (both with a throughput capacity of 70kbpd) and the Northern Plant (throughput capacity of 170kbpd). As of today, only the Salahuddin 2 unit is working properly – Salahuddin 1 has had most of its reconstruction works completed on the hydrogen and gasoline units but is still yet to restart, with the Northern Plant requiring the most overhauling. The new Iraqi government claimed that it expects all Baiji repair works to be completed by 2023. The commercial rationale to maximize refinery output is more than evident – despite struggling with deficit-plagued budgets, Iraq spends some $2.5 billion per year on importing oil products.
One can barely call the above mentioned developments a success – across the board downstream projects have run into financing problems and subsequent delays. Yet Iraqi authorities keep on surprising the general public by claims that the Middle Eastern nation would build 5 new greenfield refineries with a total refining capacity of 790kbpd. In late 2019 the Ministry of Oil has issued a list of the 5 given refineries – Kirkuk (70kbpd), Wasit (140kbpd), Nasiriyah (140kbpd), Basrah (140kbpd) and al-Faw (300kbpd). The peculiar choice of locations raises some evident questions – if the government remains intent on bringing the Shuaiba refinery back to full capacity, why would it seek two further refineries in the Basrah Governorate with an incremental capacity of 440kbpd (ie to a total of 840kbpd)?
Realistically speaking, the list of greenfield refineries to be built is more about the government signaling the extent of its wishes rather than determining specific goals for the upcoming years. Moreover, Iraq has another long-running downstream saga – that of the 140kbpd Karbala Refinery, basically the only greenfield refinery in the history of modern Iraq. According to the Oil Ministry, Karbala is 88 percent complete and would be fully ready for commissioning by 2023, the same year when repair works on its brownfield assets would be finalized. Karbala is located midway between Baghdad and Najaf, with the $6.4 billion construction overseen by a South Korean consortium headed by Hyundai. As usually with Iraqi refineries, Karbala’s 2023 commissioning deadline would be 5 years beyond the initially set deadline – understandable, given that it is predominantly financed by the ever-cash-strapped government.
On a separate note, the oil refineries of Iraqi Kurdistan form a separate microcosm – in contrast to the southern governorates Erbil lacks a downstream powerhouse. The 110kbpd Kalak Refinery might have been the flagship of the region’s refining activities yet it remains severely underutilized, at 20-30% on average. The only refinery in Kurdistan that operates more or less according to its technical possibilities is the 60kbpd Ninewa Refinery. The problem is that against the background of OPEC+ commitments and upstream investments plummeting in 2020 feeding the Kurdish refineries (the latest one of which was commissioned in July 2019, the 40kbpd Erbil Refinery) with substantial amounts of crude is a rather difficult affair.
By Viktor Katona for Oilprice.com
https://oilprice.com/Energy/Crude-Oil/Iraq-St...eries.html
By Viktor Katona - Aug 31, 2020
Still struggling to overcome the draining consequences of almost ceaseless conflict and political haggling, Iraq has nevertheless managed to overcome the worst of the 2020 oil market slump in its upstream sector. It demonstrated sufficient subtlety with its Kurdish exports and has more or less reined in its OPEC+ non-compliance antics, to avoid the ire of leading crude exporters. Yet as Baghdad and other Iraqi cities put up with the intense August heat when temperatures are routinely above 45 °C, Iraqi authorities have started to chart a pathway for the Arab nation’s downstream segment, too – albeit a bit too ambitious given the conditions of today’s Iraq; one might argue that staying realistic is the best Baghdad can do. Iraq’s only fully functional refinery is located in Shuaiba near the Basrah hub of crude production, where a 210kbpd refinery is serving the product needs of the south. Under normal circumstances, Shuaiba should have processed some 280kbpd, using a fourth refining unit, however the realities of being an oil-dependent war-torn Middle Eastern nation and the COVID pandemic have gotten in the way. Shuaiba has had its fair share of difficulties in the past years as the river water it relies on is becoming increasingly salinated and was forced to temporarily shut down refining because of that – might not seem that tragic in the COVID-19 era when demand for fuels has plummeted but definitely was a dangerous development before that given all the missing output from the Baiji Refinery.
While the Shuaiba Refinery caters for the products need of Iraq’s South and the 140kbpd Daura Refinery is feeding the exigencies of the burgeoning Baghdad market, the ill-fated Baiji Refinery (some 130km from Baghdad) was satisfying the needs of the nation’s heartland. Yet Baiji has suffered immensely on the back of plentiful military operations – first it was damaged by ISIS’ barbaric actions, only to take another hit when the Iraqi internal forces recaptured it in 2015. Last week the Iraqi oil ministry has set a deadline to the completion of the partially destroyed 310kbpd Baiji Refinery complex, one of the most badly damaged key infrastructure assets during the Islamic State sudden onslaught on Iraq.
Related: The Innovative Solution Bringing Electricity To Crisis Stricken Areas
Nominally, Baiji consists of 3 different parts – Salahuddin 1 and 2 (both with a throughput capacity of 70kbpd) and the Northern Plant (throughput capacity of 170kbpd). As of today, only the Salahuddin 2 unit is working properly – Salahuddin 1 has had most of its reconstruction works completed on the hydrogen and gasoline units but is still yet to restart, with the Northern Plant requiring the most overhauling. The new Iraqi government claimed that it expects all Baiji repair works to be completed by 2023. The commercial rationale to maximize refinery output is more than evident – despite struggling with deficit-plagued budgets, Iraq spends some $2.5 billion per year on importing oil products.
One can barely call the above mentioned developments a success – across the board downstream projects have run into financing problems and subsequent delays. Yet Iraqi authorities keep on surprising the general public by claims that the Middle Eastern nation would build 5 new greenfield refineries with a total refining capacity of 790kbpd. In late 2019 the Ministry of Oil has issued a list of the 5 given refineries – Kirkuk (70kbpd), Wasit (140kbpd), Nasiriyah (140kbpd), Basrah (140kbpd) and al-Faw (300kbpd). The peculiar choice of locations raises some evident questions – if the government remains intent on bringing the Shuaiba refinery back to full capacity, why would it seek two further refineries in the Basrah Governorate with an incremental capacity of 440kbpd (ie to a total of 840kbpd)?
Realistically speaking, the list of greenfield refineries to be built is more about the government signaling the extent of its wishes rather than determining specific goals for the upcoming years. Moreover, Iraq has another long-running downstream saga – that of the 140kbpd Karbala Refinery, basically the only greenfield refinery in the history of modern Iraq. According to the Oil Ministry, Karbala is 88 percent complete and would be fully ready for commissioning by 2023, the same year when repair works on its brownfield assets would be finalized. Karbala is located midway between Baghdad and Najaf, with the $6.4 billion construction overseen by a South Korean consortium headed by Hyundai. As usually with Iraqi refineries, Karbala’s 2023 commissioning deadline would be 5 years beyond the initially set deadline – understandable, given that it is predominantly financed by the ever-cash-strapped government.
On a separate note, the oil refineries of Iraqi Kurdistan form a separate microcosm – in contrast to the southern governorates Erbil lacks a downstream powerhouse. The 110kbpd Kalak Refinery might have been the flagship of the region’s refining activities yet it remains severely underutilized, at 20-30% on average. The only refinery in Kurdistan that operates more or less according to its technical possibilities is the 60kbpd Ninewa Refinery. The problem is that against the background of OPEC+ commitments and upstream investments plummeting in 2020 feeding the Kurdish refineries (the latest one of which was commissioned in July 2019, the 40kbpd Erbil Refinery) with substantial amounts of crude is a rather difficult affair.
By Viktor Katona for Oilprice.com
https://oilprice.com/Energy/Crude-Oil/Iraq-St...eries.html
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