June 7th, 2010

Dathar Al-Khashab



Dathar Al-Khashab, Director General of Midland Refinery Co, gives his take on Iraq’s planned refining investment conference scheduled for June 26, in an interview with Ruba Husari in Baghdad.

Q: Do you expect Iraq to succeed in getting foreign investors to build any of the four refineries on offer?

A: It is very hard to get investors to invest in any refineries anywhere, not just in Iraq because margins are very limited. As far as Iraq is concerned, several improvements to the refinery investment law have been introduced with several incentives including discounting feedstock crude by 5% to market price instead of 1% initially. There are also several options the ministry of oil is looking into for lifting products for the domestic market and for exporting because there will come a day when we will be able to satisfy the local demand. In that case the investor will have to secure foreign markets because otherwise it’s not economical to operate a refinery at anything less than 100% of its capacity.

Q: Shouldn’t Iraq have made more efforts in the past years to attract foreign investors to the refining sector instead of focusing on importing refined products at a time when demand has been increasing exponentially?

A: My personal view is that we should have married the field development projects with building refineries. Maybe we could have succeeded in offloading a couple of refineries if they were linked to field development contracts. I personally think it’s not easy to get investors for all four refineries on offer. Nassiriya could be attractive because it has a 300,000 b/d nameplate capacity and size counts. Missan’s 150,000 b/d refinery could also be attractive to investors due to proximity to Iran and would be well located for future exports.

Q: How long would it take to build either of these two refineries?

A: You have to bear in mind that all refineries will require building crude feedstock pipelines. But it is possible to build a refinery in three years if one buys a licensed design and do not work on a new design from scratch. That would reduce the construction time from five to three years.

Q: The ministry has already awarded front-end engineering and design (FEED) contracts for all four new planned refineries. Would that help reduce the time required?

A: The FEED once done will essentially help the ministry define what we need and get some of idea of the cost involved in building the different-sized refineries. But it will also be useful to the investor because it offers a sort of a road map.

Q: Iraq has been lacking catalytic cracking for decades. Would any of the new refineries have any?

A: The planned Nassiriya refinery is expected to have complex units including a FCC (fluid catalytic cracker) unit and reformer. At Daura refinery we have signed contract for a FEED for a RFCC (reduced fluid catalytic cracker) which we will have to decide later whether we build ourselves with our capital investment budget or to ask for a private investor. I expect cost to be in the range of $1.2-$1.5 billion. With the right incentives, I don’t think it would be a problem to get an investor. Basrah refinery is working on getting a RFCC too. Baiji refinery has an old cracking unit built in the 1980’s which restarted operating recently.

Q: How is the refurbishment of Daura refinery progressing?

A: We have already commissioned a 70,000 b/d crude unit last year and another 70,000 b/d unit is under construction. It should be commissioned in a month or so. We have one isomerisation unit and one reformer unit under construction, we have just started civil engineering work. They will most probably be commissioned by 2012 and will produce lead-free gasoline for the first time.

Q: Where does Daura’s operating capacity stand at the moment?

A: It’s 140,000 b/d but should be 210,000 b/d once the new unit is commissioned this summer. The ministry is working hard to provide crude for the new units but so far the maximum feedstock we could get was 105,000 b/d for a short period of time. Today for example we are at 65,000 b/d because a crude processing unit is under maintenance. But on average we get 85,000 b/d – 90,000 b/d. We are very much dependent on the crude we get.

The Interview