Japan’s JGC has signed the main contract for Iraq’s Basra refinery upgrading project, according to a statement released by the company.

A signing ceremony was held in Baghdad on 1 October.

JGC received the letter of award for the project in August 2020.

At the time, the Japanese company said the project would use a lump-sum contract under the engineering, procurement, construction and commissioning (EPCC) model.

It also said the estimated value of the project was approximately ¥400bn ($3.75bn).

The client on the project is state-owned South Refineries Company (SRC), which operates under the Iraqi Ministry of Oil.

The signing ceremony was attended by Iraqi Minister of Oil Ihsan Abdul Jabbar Ismail, Iraq’s Minister of Planning Khalid Najim, Japanese government officials, and the president of JGC Corporation Yutaka Yamazaki.

The upgrade project will install new facilities on land adjacent to the existing Basra refinery.

The new facilities include a fluid catalytic cracking unit, a vacuum distillation unit and a diesel desulfurisation unit.

Refining capacity

Although Iraq is one of the world’s leading oil-producing countries, the two refineries in operation were constructed in the 1970s and are experiencing a decline in production capacity due to war damage and deterioration.

Unable to meet domestic demand for petroleum products, Iraq has to import petroleum products such as gasoline.

The completion of this project will boost the country’s production of gasoline by 19,000 barrels a day (b/d) and production of diesel by 36,000 b/d.

It is hoped this will help to reduce the gap in supply and demand for petroleum products, and will contribute to the economic recovery of Iraq.

In carrying out this project, JGC plans to conduct skills training for more than 1,000 Iraqis and hire approximately 7,000 skilled Iraqi workers, according to the statement released by the company.

It is expected that more than 2,000 operating personnel jobs will be created after the project’s completion, which will contribute to tackling the unemployment problem in Iraq.

The Basra refinery has two existing trains that use atmospheric distillation and have a design capacity of 70,000 b/d each. These were put in operation in the 1980s.

The Iraqi Ministry of Oil first decided to upgrade the Basra refinery to increase gasoline production capacity through the installation of a new FCC unit in 2011.

In 2014, MEED revealed that three firms had prequalified to bid for the project. The three companies, all Japanese, were Chiyoda Corporation, JGC Corporation and Toyo Engineering.

Under the original plans, the new FCC complex will be built in a dedicated area outside the existing refinery and will include related infrastructure including storage facilities, utility systems, control buildings and associated facilities.

Jica loans

The project has been facilitated by two loans from the Japan International Cooperation Agency (Jica), a governmental agency that coordinates official development assistance (ODA) for the government of Japan.

It is chartered with assisting economic and social growth in developing countries, and the promotion of international cooperation.

The first Jica loan was worth ¥43bn ($406m) and was agreed in 2012.

The loan had a 40-year tenor with a ten-year grace period, and was tied to Japanese procurement.

The second Jica loan was agreed last year and had a value of $1bn, making it one of the biggest loans Japan has ever provided for a single project in the Middle East and North Africa (Mena) region.

It is the largest-scale reconstruction assistance from Japan since the 2003 Iraq War.

In August, MEED revealed that South Korea’s Hyundai Engineering & Construction has been in talks with JGC regarding the Basra refinery upgrade project.

JGC and Hyundai Engineering & Construction have previously worked together on several major projects in the Middle East.

Last year, a joint venture of the two companies submitted technical bids for a package of Qatar’s North Field Expansion project that is estimated to be worth $20bn.

The package, known as EPC-1, includes the construction of four new liquefied natural gas (LNG) process units that will be the largest LNG production trains in the world.

This article is published by MEED, the world’s leading source of business intelligence about the Middle East. MEED provides exclusive news, data and analysis on the Middle East every day. For access to MEED’s Middle East business intelligence, subscribe here.