DMEA: Iraq signs loan agreement for Basra refinery project

A Japan International Cooperation Agency (JICA) loan agreement worth $388nm has been signed by Iraqi Finance Minister Taif Sami for the sixth phase of Iraq’s 210,000 barrel per day (bpd) Basra Refinery Development Project (BRDP), signifying the project’s emergence as one of the country’s largest foreign-funded initiatives.

Speaking at the signing ceremony, Sami noted that the project had taken place in line with the objectives of Iraq’s ministerial programme, which emphasises “supporting loans for economically viable investment projects”. The minister added that borrowing from Japan was an important element to continuing the two countries’ economic relationship and highlighted that it represented “one of the largest foreign loan-funded investment projects” in Iraq.

Sami continued to say that the loan would “contribute to the completion of the project,” and would “[reduce] Iraq’s reliance on imported petroleum products by meeting domestic demand for petroleum derivatives”.

The minister also noted that the project would play an important role in dealing with environmental concerns – due to the inclusion of fluid catalytic cracking (FCC) technology in its construction.

According to Sami, the technology is the first of its kind in the Middle East and is expected to remove sulphur content from light diesel oil – improving the quality of the plant’s products overall.

The refinery’s sixth phase is set to conclude a series of agreements signed in previous years – and is expected to “stimulate private sector participation in Iraq's energy sector” – according to Sami – upon its completion, improving job opportunities alongside.

So far, it is estimated that around 93% of the project has been finished. If the Ministry of Oil and the plant’s operator South Refineries Co. can stay on track, test runs are expected to commence in 2025.

Funding for the BRDP first commenced in mid-2019, when JICA entered into an initial agreement with Iraq’s Ministry of Finance for a $1bn loan to upgrade the refinery – which was built in the 1970s.

In October 2020, Japan’s JGC was awarded a $3.75bn engineering, procurement and construction (EPC) to build a new FCC complex on land adjacent to the existing refinery at Shuaiba.

At that point, JICA said it had concluded three loans for the project – a first tranche of $379mn, a second tranche of $994mn and $19mn for engineering services.

The company said at the time that “the project to construct Iraq’s first-ever FCC complex will unleash the potential of Iraq’s refining sector to produce the larger volume of the high-value outputs, promote the transfer of refining technologies from Japan and help save valuable foreign currencies [needed] to import huge amount of fuels”.

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