Iraq to counter fuel crunch with more crude refineries

Ministry vows to immediatly stop fuel smuggling across the borders by increasing prices

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By  OGME Staff Published  December 4, 2005

Iraq is planning to build at least two new refineries to counter petrol shortages that force the country to import almost 50% of its fuel needs, said the Iraqi oil minister. A new refinery at Nassireyah in the south will produce 300,000 barrels per day (bpd), and a plant at Hindeyah, south of Baghdad, will run at 140,000 bpd, said Ibrahim Bahr Al Uloum, Iraqi oil minister. At least ten international oil firms are in the race to build the US $1 billion Hindeyah project, and the winners will be picked by the end of the year, he said. Oil officials say Iraq’s eight refineries are now operating at only 50 - 75% of capacity, forcing the country to import most of its refined products. Its three large refineries are at Baiji, Basra and Daura. Iraq has announced that it will drastically increase the prices of domestic fuels in order to stop smuggling of products to neighbouring countries. Iraq has the world’s third largest known reserves of oil, but decades of war, sanctions, under-investment, and now widespread violence and sabotage have left it critically short of fuel. The Iraqi oil ministry sacked more than 450 employees in April, for smuggling oil through illegal taps in the pipelines. At that time, oil inspector Ali Muhsin Ismael said, “the government’s inability to provide security was partly responsible for the situation.” Iraq relies heavily on its southern crude oil exports, because sabotage bombings of pipelines have repeatedly hurt efforts to export from the north via Turkey. Oil exports are Iraq’s sole independent source of finance needed for reconstruction after crushing sanctions and three wars. Production has been stuck near two million bpd and a significant increase is not expected soon.

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