Foster Wheeler Secures Study and Design Contract for Iraqi Refinery

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Researched by Industrial Info Resources (Sugar Land, Texas)--Foster Wheeler AG (NASDAQ:FWLT) (Clinton, New Jersey) has secured a feasibility study and front-end engineering and design (FEED) contract from the Iraqi Ministry of Oil for a greenfield refinery near Nasiriyah, the capital of Iraq's southern province Dhi Qar. The production capacity of the proposed state-owned refinery has been stated as 300,000 barrels per day (BBL/d). The refinery's products will include gasoline, cooking fuel and diesel, and will be connected to an export line. The refinery project is expected to be completed in about two years.

Under the terms of the contract, Foster Wheeler will prepare a feasibility report for the project that will include a study of the design basis of the refinery facilities, evaluate proprietary technologies, configure the refinery plans to meet the client's needs and processing objectives, prepare the FEED package for the complete project, and engage the licensors selected for the project. The commercial value of the contract has not been disclosed yet, but will be announced as part of Foster Wheeler's second-quarter 2010 bookings.

The Ministry of Oil has been deliberating on a project of this scale since the 1980s, when Iraq's refining industry was damaged by wars and a lack of investment. The Nasiriyah Refinery project was first announced in late 2006, but progress was delayed by lack of security and sufficient funds. In April 2009, the ministry signed a standalone $128 million contract with Foster Wheeler that involved the preparation of the final refinery design. The refinery site is near the 300,000-BBL/d Al-Nasiriyah Al-Kabir field, the 130,000-BBL/d Al-Gharraf field, and the 110,000-BBL/d Al-Rafidein field.

With reserves amounting to about 116 billion barrels of oil, Iraq has the world's third-largest oil reserves after Saudi Arabia and Iran, but the country has been unable to tap this huge reserve because of a lack of funds.

In May this year, Iraqi Oil Minister Hussain Al Shahristani said that Iraq might hold a third round of auctions for developing some of the fields, such as the 8.1 billion-barrel East Baghdad reserve, the 2.3 billion-barrel Bai Hassan reserve, and the 8.5 billion-barrel Kirkuk reserve. In 2008-09, Iraq conducted two bidding rounds for oil fields with total reserves of 43 billion barrels and 41 billion barrels of oil, respectively, and signed deals with several global oil companies as part of a plan to enhance crude production from the existing 2.5 million BBL/d to levels closer to the Saudi Arabia's 12 million BBL/d. Shahristani said that at current production levels, Iraq's oil output capacity should increase by about 200,000 BBL/d and reach 2.7 million BBL/d by the end of 2010. Output in 2011 is expected to increase by another 500,000 BBL/d.

The country has also begun the process of developing and executing plans to build or revamp several refineries in an effort to revive its oil infrastructure after years of war, neglect and sanctions. After several decades of shortfall, in 2008-09 Iraq successfully met its transportation fuel needs with domestic oil production. In April 2009, Iraq announced plans to implement a $50 billion industry overhaul plan. Shahristani said that Iraq intended to double its refining capacity from 750,000 barrels per day within the next five years by building four refineries and overhauling the existing ones. He said that the engineering design for all four would be completed this year, and the country is currently exploring joint venture initiatives with overseas companies.

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