Iraq looks to ramp up development of chemicals complex

Baghdad has prioritised raising production capacity and increasing its oil exports following the defeat of ISIS

An aerial view of Baghdad. The latest development is a sign of the new government's intent to diversify its energy sector away from crude exports. Reuters

Iraq plans to develop a petrochemicals complex and is putting in place legal and contractual measures to help it become the biggest producer for such products in the region.

"In the last few days, the ministry has intensified meetings with the relevant authorities ... and agreed to speed up the required procedures ... finalise the contractual and legal procedures with the concerned parties before the end of this year, including Shell International...,” Iraqi oil minister Ihsan Abdul Jabbar said.

Iraq signed an agreement with Shell in 2015 to build an $11 billion (Dh40.4bn) petrochemicals complex in the southern, oil-rich province of Basra. But progress on the project has been slow.

The latest development is also a sign of the new government's intent to diversify its energy sector away from reliance on crude exports.

Iraq's move comes as national oil companies in the Middle East such as Saudi Aramco and Adnoc have increased capital spending on downstream projects – in refining and petrochemicals – as they look to earn more revenue from the sale of petrochemicals. Iraq, following the defeat of ISIS, has prioritised raising its production capacity and its oil exports, which contribute to 90 per cent of government revenue.

Opec’s second-largest producer is now gradually rebuilding its power infrastructure and refining facilities damaged during decades of conflict.

Iraq’s oil ministry also plans to nearly double refining capacity at the Baiji complex. The refining, which is currently processing of 75,000 barrels per day will be able to refine 140,000 bpd over the next few months, the oil ministry said last week. Processing capacity could reach 280,000 bpd once reconstruction is complete. The refinery had a capacity of 310,000 bpd prior to damage during its takeover by Isis in 2015.

Last year, Iraq’s electricity ministry awarded Siemens a $1.3bn contract to rebuild two power plants associated with the Baiji refining complex.

The German industrial giant, which has partnered with Iraq in its $15bn roadmap agreement to develop power projects, will rebuild the Baiji 1 and 2 power plants, which are located 250 kilometres north of Baghdad and will add 1.6GW of capacity when completed.