Search: 1 2 3 4 5 OUR COMPANY SERVICES FABRICATION REFINERIES CONTACT US December 9th, 2012 · News In the early days of Kurdistan’s oil industry, local businessmen would turn up unannounced at oil wells and offer operators cash for their crude, which they then drove in tankers to primitive “teapot” refineries and turned into asphalt. There are still a few teapots but these days much of Kurdistan’s oil is piped straight into big modern refineries, which churn out everything from heavy fuel oil to high-octane petrol.The largest of them, in Kalak, near Erbil, is a symbol of modernity in a region that had no refineries at all until a few years ago. Workers in crisp orange overalls sweep up dust from under the spotless pipework and gardeners tend beds of rose bushes and oleander. On its outer fringes, bulldozers churn up a huge construction site, part of an expansion led by US group Ventech Engineers to more than double Kalak’s capacity. Kurdistan’s refining sector is growing fast, fuelled by the plentiful oil reserves discovered in the region in the past four years. It now has refining capacity of 100,000 barrels of oil a day, a figure that is set to rise sharply in the coming years. The region is almost completely selfsufficient in some refined products, such as fuel oil. Unlike the upstream sector, Kurdistan’s refining industry is almost the exclusive preserve of locals, among them KAR Group, one of the region’s largest private companies, which operates Kalak. This is a big change from the era of Saddam Hussein. “Before, Iraq didn’t allow Kurds to enter strategic industries like refining,” says Hejar Azad, KAR’s process and site manager, who is overseeing Kalak’s expansion. With autonomy, that has changed. “I am a Kurdish engineer and am managing a whole refinery.” KAR is now established on all links of the oil value chain. Kalak is supplied with crude from a huge oilfield near Kirkuk, the Khurmala Dome, which KAR operates, through a 40km pipeline built by KAR. The group plans to build a gas-fired power plant in the Khurmala area and recently raised financing for the project from the Czech Export Bank. Kalak is expanding fast. Its capacity of 40,000 barrels a day will rise to 100,000 b/d early next year with the expansion. Kalak will then supply 75 per cent of local demand for products such as high-octane gasoline. Others are also moving ahead. The Bazian refinery, near Kurdistan’s second city of Suleimaniya, was taken over in 2009 by a local trading company, Qaiwan. It is being upgraded by Ventech to increase its capacity to 34,000 b/d. Innovative logistics are needed for such a remote, landlocked region. For Kalak, Ventech designed and built a fully engineered refinery complex at its facility in Texas and shipped it to the Turkish port of Mersin, from where it was sent overland to Kurdistan. Part of the success of the refining sector lies in the chosen model. Feedstock is supplied by the government and the refined products go to the government. Refiners are paid a perbarrel processing fee. “It gives you guaranteed cash flow and it is a low, manageable risk,” says Baz Karim, KAR chief executive. In contrast, refiners in the rest of Iraq must buy the feedstock from the government, usually at a small discount to the world price of crude, and sell the refined product into the local market themselves. Yet with the price of gasoline and diesel in Iraq kept artificially low by government fiat, it is hard for refiners to make money. Deterred by such terms, investors have tended to steer clear of the Iraqi refining industry. The government has responded by changing its model: it is inviting investors to develop one of the country’s big oilfields, Nasiriya, and build a refinery nearby as part of an integrated project. Any products surplus to the needs of the local market can be exported. It is still unclear whether this new approach will attract the same level of interest as Kurdistan’s downstream industry has. Meanwhile, the northern region’s prospects are undimmed. The industry is underpinned by strong growth in demand for refined products locally. The recently built Erbil International Airport, for example, has increased the appetite for jet fuel and other downstream opportunities beckon. Mr Karim speaks of branching into petrochemicals and producing pesticides, fertilisers and detergents. Local companies hope to expand their reach into the south, despite the political differences between Erbil and Baghdad. The regional government has spoken of Kurdistan becoming a net exporter of certain refined products next year. “Our goal is to meet all of Kurdistan’s needs and, if we can, help neighbouring governorates, which also have a shortage,” says Mr Karim. By Guy Chazan SOURCE The Financial Times Our Company Services Fabrication Refineries Contact Us © Copyright 2012. Ventech Engineers International LLC