Overview of infrastructure in Iraq

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Recurring conflict in Iraq has left much of the existing energy infrastructure either damaged or in a poor state of repair. The International Energy Agency (IEA) earmarked the state of Iraq's energy transport, storage and export infrastructure as a serious constraint to progress in the energy sector.[1]

In order to reach its stated production targets, Iraq will have to expand its export capacity. By law the country's oil infrastructure is in the hands of the state. Deputy Prime Minister Shahristani has said that $500 billion of investment will be needed to lift oil production in line with targets.[2] According to the IEA, sufficient oil storage and transportation capacity will also be needed to avoid over-reliance on the souther sea-borne export route.[3]

Refineries

A leaked US diplomatic cable from 2009 commented on the poor maintenance and antiquated design of Iraq's refinery infrastructure. Whereas modern refineries produce 80 - 90 percent of a barrel of oil into light or medium distillates, while Iraq's refineries produce between 50 and 55 percent, thus creating large amounts of heavy fuel oil.[4]

Iraq's principal refineries are at Basra, Daura, and th Baiji. The country's refineries are divided between three operating companies: the North Refineries Company (NRC), the Midland Refineries Company (MRC), and the South Refineries Company (SRC).[5] The facilities at Baiji, Daura and Basra account for around 70 percent of total output.[6]

The country's oil processing facilities have run below capacity following the 2003 invasion. As of October 2012 overall refining capacity in Iraq stood at around 620,000 barrels per day (bpd), however following a series of expansions, particularly at the Daura and Basra facilities, the Iraqi government hoped to expand this by 23 percent to reach 760,000 bpd by early 2013.[7] However estimates differ and according to a US diplomatic cable from early 2009, design refining capacity in Iraq stood at approximately 740,000 bpd.[8] However according to a leaked US diplomatic cable from 2009, plans to modernise and expand Iraq's refineries have moved slowly due to difficult contracting procedures, a shortage of skilled staff and unreliable electricity supplies making safe operation of equipment.[9] The country is also planning to build four new refineries at a cost of around $25 billion, including a 300,000 bpd plant in Nasiriyah and a 140,000 bpd plant in Karbala.[10]

In the northern Kurdistan region the majority of official refining capacity is provided by the Khabat refinery near Erbil[11] (capacity of 40,000 bpd in 2010).[12] Other refineries in the region are Bazian in Sulaimani and Kat in Kirkuk. Iraq Oil Report estimated in 2012 that the region's major refineries are capable of processing 66,000 bpd in total, and the government had plans to expand capacity with two new refineries.[13] In addition, in 2012 there were an estimated 80-100 so-called "topping plants" available to the KRG, smaller and less efficient facilities, with an estimated capacity of 150,000 bpd.[14]

Terminals

Iraq has two terminals at Basra and Khor al-Amaya. Up until the construction of two new export terminals at Khor al-Amaya in March 2012, Basra was the country's main export terminal, with the terminal at Khor al-Amaya handling only small volumes.[15]

The EIA's 2012 report notes that the lack of sufficient storage in the south of Iraq is a particular problem, meaning that any delays or weather-related interruptions to loading tankers at the offshore facilities can lead directly to a production shut-down. New storage capacity was being built in 2012 at the main export depot at Fao, but further expansion of capacity was required.[16]

Pipelines

According to Iraq Oil Report, Iraq's crude pipelines are long overdue for inspection and would need to be upgraded or replaced if Iraq is to succeed in increasing its oil exports. The country urgently needs to expand its capacity and find alternative export routes, as the primary export route through Basra is "logistically constrained" to around 5 million bpd of exports, while Iraq is looking to increase production capacity to 3.4 million bpd by 2018.[17]

Aside from the export terminals at Basra and Khor al-Amaya, Iraq's other principal export route is the northern pipeline route to Ceyhan. According to the Ministry of Oil the maximum capacity along this route at the time was 600,000 bpd, far below the "nameplate capacity" of 1.6 million bpd. Actual flow rates averaged just over 300,000 bpd in June 2012.[18]

The pipeline system from Iraq to Turkey suffered much damage during Iraq's wars, causing a fall in capacity. Iraq's reversible north-south pipeline, the Strategic Pipeline was also damaged by the conflict and can carry only a fraction of its 1.4 million bpd capacity.[19]

Iraq has announced plans in the past to rebuild its national strategic pipeline network, calling for expanding capacity into Turkey and opening routes to both Jordan and Syria. A strained relationship with Turkey and conflict in Syria complicated these plans. But in 2012 the Iraqi government set a target of creating 1 million bpd of export capacity to Jordan, via a 1,680 kilometre (km) pipeline from Basra, up to Haditha and into Jordan. This would be the first cross-border pipeline constructed since the Iraq Pipeline through Saudi Arabia (IPSA) was built in the 1980s and later expropriated by the Saudis.[20]

The Iraq Pipeline through Saudi Arabia (IPSA) remained out of operation in early 2013 despite talk of reactivation.[21]

Other projects

Since 2008 the Iraqi government has also been pursuing a project to capture and use surplus gas produced at the country's southern fields, in collaboration with oil major Shell, known as the South Gas Utilisation Project.[22]

References

  1. "Iraq Energy Outlook" IEA, 12 November 2012.
  2. Will Iraq be the next oil superpower?”. Petroleum Economist, 12 December 2012.
  3. "Iraq Energy Outlook" IEA, 12 November 2012.
  4. "Iraqi Refineries Present And Future Wikileaks, 8 January 2009.
  5. "Iraqi Refineries Present And Future Wikileaks, 8 January 2009.
  6. "Iraq Energy Outlook" IEA, 12 November 2012.
  7. "Iraq Plans to Boost Oil-Refining Capacity by 23% Early Next Year" Bloomberg, 4 October 2012.
  8. "Iraqi Refineries Present And Future Wikileaks, 8 January 2009.
  9. "Iraqi Refineries Present And Future Wikileaks, 8 January 2009.
  10. "Iraq Plans to Boost Oil-Refining Capacity by 23% Early Next Year" Bloomberg, 4 October 2012.
  11. "KRG oil deals buoyed by refinery plan" Iraq Oil Report, 29 March 2012.
  12. "xKurdish Refinery to Start Selling Petrol" Iraq Business News, 8 December 2010.
  13. "KRG oil deals buoyed by refinery plan" Iraq Oil Report, 29 March 2012.
  14. "KRG oil deals buoyed by refinery plan" Iraq Oil Report, 29 March 2012.
  15. "Iraq ramps up its crude exports" Lloyd's List Intelligence, 20 September 2012.
  16. "Iraq Energy Outlook" IEA, 12 November 2012.
  17. Iraq sets Jordan pipeline into motion”. Iraq Oil Report, 2 January 2013.
  18. "Iraq Energy Outlook" IEA, 12 November 2012.
  19. Will Iraq be the next oil superpower?”. Petroleum Economist, 12 December 2012.
  20. Iraq sets Jordan pipeline into motion”. Iraq Oil Report, 2 January 2013.
  21. "Circumventing the Strait of Hormuz' Bottleneck" Atlantic Sentinel, 20 December 2011.
  22. "Shell signs £11bn deal to fuel Iraq's power stations with gas Guardian, 27 November 2011