The Japan International Cooperation Agency (JICA), a development aid agency under the Japanese Government, has signed an official development assistance (ODA) loan agreement of up to Y203.0bn ($1.4bn) with the Government of the Republic of Iraq to fund the Basrah Refinery Upgrading Project.

The upgrade project involves installation of a new fluid catalytic cracking (FCC) complex at the Basrah Refinery to improve Iraq’s oil products production capacity that meet environmental standards.

The FCC Complex will be equipped to convert residual oil from the existing plants into high-value oil products.

Being implemented by state-owned South Refineries Company (SRC), which is a part of Iraq’s Ministry of Oil, the Basrah refinery upgrade project also includes the construction of a depressurisation distillation unit and light oil desulphurisation unit, among other works.

Earlier, JICA provided four ODA loans for the upgrade of the Basrah refinery, with the first tranche of Y42.43bn signed in October 2012.

The second tranche of Y110bn was signed in June 2019, and the third of Y32.70bn in October 2021. The fourth tranche of y120bn was signed in December 2022.

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The JICA said the latest loan has an interest rate of 0.2% for the project component while the consulting component has an interest rate of 0.01%. The period of repayment is set at 40 years, with a grace period of ten years.

Iraq, although claimed to hold high oil-producing potential, is heavily dependent on other oil-producing countries as its oil-refining facilities are currently out of service or deteriorating.

In a press statement, JICA said: “By installing the FCC complex in Iraq, this project will enable the country to produce oil products that meet international environmental standards, strengthening the oil sector – which dominates Iraq’s economy – and thereby contributing to the country’s economic and social reconstruction.”