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Japan issues $1.4bn loan for Iraq refinery project

21 August 2023

Japan International Cooperation Agency (Jica) has signed an agreement with Iraq’s oil ministry to provide a loan of up to  $1.4bn to the country’s South Refineries Company (SRC) for the Basra refinery upgrade project.

The official development assistance (ODA) loan has an interest rate of 0.2 per cent for the project component and 0.01 per cent for the consulting component, Jica said on 17 August.

The repayment period is 40 years, with a grace period of 10 years.

“The main contract is Japan-tied and subcontracting is general untied under the Special Terms for Economic Partnership (Step) applicable to the ODA loan,” Jica said in its statement.

This generally implies that the main agreement partner must be a Japanese company, an overseas subsidiary of a Japanese company or a joint venture of a Japanese company and the borrowing country where the Japanese company is the lead partner.

The ODA loan is the fifth tranche of financing provided by Jica for the estimated $4.6bn Basra refinery upgrade project.

The four previous tranches released by Jica were:

  • First tranche of $292m in October 2012
  • Second tranche of $757.22m in June 2019
  • Third tranche of $225.1m in October 2021
  • Fourth tranche of $828m in December 2022
Basra refinery upgrade

The Basra refinery is located 12 kilometres east of Iraq’s southern city of Basra in Basra Governorate, and is one of the country’s biggest crude oil refineries. Upgrading the asset will not only increase Iraq’s crude refining capacity but will also help its oil products meet international environmental standards.

SRC’s goal is to install a new fluid catalytic cracking (FCC) complex at the Basra refinery, which constitutes the main engineering, procurement, construction and commissioning (EPCC) package of the upgrade project.

It also covers installation of new facilities on land adjacent to the Basra refinery, including a vacuum distillation unit and a diesel desulphurisation unit.

Japanese contractor JGC Corporation won the FCC package in August 2020, with SRC officially awarding the contract on 1 October 2020. EPCC works on the package began on 15 February 2021.

In April 2021, France’s Axens won a contract to provide the following four process technologies to SRC for the Basra refinery upgrade project:

  • Diesel hydrotreatment unit (Prime-D)
  • Vacuum gasoil (VGO) hydrotreating unit
  • VGO fluid catalytic cracker unit
  • Oligomerisation unit (polynaphtha)

In addition, Axens is to provide catalysts, adsorbents, proprietary equipment, training and technical services.

Separately, JGC divided the civil engineering works on its main EPCC package into two sub-packages and subcontracted those to Turkish contractors Tekfen Construction and Ronesans Holding last year.

MEED recently reported that civil engineering works will be completed in August.

Overall EPCC works on the Basra refinery upgrade project are scheduled for completion in August 2025.

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Indrajit Sen

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