Refinery in Iraq set to go ahead

Iraqis who have to wait hours for petrol may soon have solace with a $6.5 billion refinery, but the project will have to overcome major security risks.

Plans for a multibillion-dollar refinery near Baghdad are moving ahead despite attacks targeting fuel-processing sites.

Iraq's ministry of oil has signed an agreement with an Iraqi-Italian joint venture to build and operate the US$6.5 billion (Dh23.87bn) 200,000 barrel per day (bpd) refinery, part of a drive to boost fuel supply.

"Such a refinery is due to become the most technically advanced refinery in Iraq," the Refinery of Karbala Corporation said. It is a joint venture between Italy's Invest International and Atconz, an Iraqi company with operations in the UAE.

Iraq plans to build three other refineries and upgrade its 140,000 bpd refinery in Basra. But such infrastructure has served as a lightning rod for militant attacks.

In February, gunmen in Baiji stormed the nation's biggest refinery, killing an engineer and detonating explosives.

The attack forced the refinery to temporarily halt its 150,000 bpd production.

Last month the refinery was forced to close again after another attack.

"They're big, high-profile projects, and disaffected individuals or even more organised groups will take on the big mega-projects," said Andreas Carleton-Smith, the director of Iraq business for Control Risks, a security consultancy.

"People in Iraq are disaffected with the level of services generally. They'll try to destabilise their activities in order to make a political statement."

Karbala, 80km south-west of Baghdad, is the scene of some of the country's worst sectarian violence.

This month two separate bombings killed at least five people and wounded more than 30 others during a Shia pilgrimage, echoing attacks from the previous year.

The refinery blueprint includes a power plant that could send extra energy to the grid and housing for at least 2,000 employees.

Providing jobs is a good tactic for international investors to bolster security, said Mr Carleton-Smith.

"The more one can do to boost the local economy and to provide jobs and security to individuals in the area … the better an impact it has on security," he said.

"If people feel they're being looked after and being well paid, and they're able to go home and look after their families as a consequence of that, I think people will feel less inclined to disrupt industry."

Plans for the refinery, first proposed in the 1980s, moved ahead last month when Iraq and Italy signed a cooperation agreement.

Saipem, an Italian engineering company, is due to provide engineering services for the refinery's construction, scheduled to begin next year.