VZCZCXRO7390
PP RUEHBC RUEHDE RUEHIHL RUEHMOS
DE RUEHKUK #0082/01 1000547
ZNY CCCCC ZZH
P R 100547Z APR 06
FM REO KIRKUK
TO RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0563
RUEHC/SECSTATE WASHDC PRIORITY 0599
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEHKUK/REO KIRKUK 0627

C O N F I D E N T I A L SECTION 01 OF 02 KIRKUK 000082 
 
SIPDIS 
 
SIPDIS 
 
BAGHDAD FOR ECON, POL, FCS, NCT, FCS, USAID 
 
E.O. 12958: DECL:  4/10/2016 
TAGS: EPET ENRG ECON EINV PGOV PINR IZ
SUBJECT: GAS/OIL REFINERY TO BE BUILT IN KURDISH REGION 
 
KIRKUK 00000082  001.2 OF 002 
 
 
CLASSIFIED BY: Scott Dean, Acting Regional Coordinator, REO 
Kirkuk, DoS. 
REASON: 1.4 (b), (d) 
 
 
 
¶1. (C) Summary:  Iraqi KAR Group CEO Baz Karim discussed bids 
for two new oil refineries, including the first in the Kurdistan 
region, slated for Koia, Sulaymaniyah Province.  Karim also 
requested advocacy from the United States for KAR's bid on the 
proposed $1.3 billion Al- Nahrian Refinery, in central Iraq, 
submitted in partnership with a consortium of U.S. companies. 
Also, Karim alleged that U.S. business partners' higher-profile 
relationships with KAR have led to a spate of recent kidnappings 
of KAR employees.  End Summary. 
 
¶2. (C) Iraqi businessman Baz Karim, CEO of KAR Group, met with 
USAID Regional Representative Brad Camp and IPAO to discuss 
KAR's current and proposed projects in the oil industry.  Karim 
said that he was informed personally by the Director of the Oil 
Institute, Sarbaz Hawrmy, that all ten of the oil development 
projects in the region would be tendered out within the next six 
months, including the Koia and Al-Nahrian refineries.  Karim 
said the Ministry of Oil had budgeted $300 million each to Koia 
and Al-Nahrian refineries for the first stage of construction. 
 
Koia Refinery - A First for the Kurdistan Region 
--------------------------------------------- --- 
 
¶3. (C) According to Karim, the Ministry of Oil in Baghdad would 
select one of six bids tendered for the Koia Refinery by the end 
of April.  The refinery would be located 20 km southwest of Koia 
city.  He said the central government had agreed to pay for the 
project, while the Kurdish Regional Government (KRG) in 
Sulaymaniyah would eventually take it over.  Karim estimated 
construction would take at least 3 years.  He said well-placed 
Kurds in Baghdad were pushing for the Koia refinery, but that it 
was unclear if non-Kurd Iraqis supported it or not. 
 
¶4. (C) Karim said the Koia Refinery was expected to have a 
refining capacity of 70,000 BBL/D of crude oil.  The Taq Taq Oil 
Fields would supply 30-40,000 BBL/D, which currently were sent 
to Turkey for refining.  The refinery would produce regular and 
premium gasoline, kerosene, gas oil, LPG and fuel oil.  KAR 
would be responsible for procurement, engineering, and 
management of construction. 
 
Al-Nahrian Refinery: Request for Advocacy 
----------------------------------------- 
 
¶5. (C) Kamrin asked for U.S. advocacy on KAR's bid for the $1.3 
billion Al-Nahrian Refinery.  KAR had formed a "dream team" 
consortium with U.S. companies CBI Howe-Baker, ABB Lummus 
Global, Mustang International, River, and Turner & Mason.  He 
said that he did not believe there would be the minimum three 
bidders required by the Ministry of Oil, which would send the 
bid back to the tendering stage and risk the $300 million 
budgeted to the project for 2006.  (Subsequently, Karim said 
there were no other bidders.)  Karim said he was concerned that 
if the money were not allocated this year, it would "disappear." 
 He said the government could legally waive the "three bid" 
requirement.  An additional bidding cycle would probably open 
the door to a Chinese bid. 
 
¶6. (C) According to Karim, the Al-Nahrian Refinery is to stand 
70 km northwest of Baghdad.  He said the refinery would be 
capable of processing 140,000 BBL/D of Basra regular crude oil 
or Mishrif crude oil and produce regular and premium gasoline, 
kerosene, gas oil, LPG and fuel oil.  KAR and the members of the 
consortium would each be responsible for the engineering and 
construction of a portion of the site's 17 processing units and 
supporting utility and offsite facilities. 
 
Kidnappings Issues Plague KAR 
----------------------------- 
 
¶7. (C) In three recent instances, Karim said, kidnappers had 
targeted KAR employees.  Earlier this year, the manager for a 
project near Hawijah was kidnapped for two weeks.  KAR did not 
negotiate with kidnappers; however, he said, the family 
negotiated the ransom down from $150,000 to $35,000 and KAR gave 
them the funds.  Also, the project manager of a major KAR fiber 
optics project in Baghdad was kidnapped and killed, despite 
payment of ransom.  Finally, two engineers were kidnapped, but 
rescued at a U.S. checkpoint when the cars were searched. 
 
¶8. (C) Karim said that in KAR's previous partnerships with USAID 
and the U.S. military on reconstruction projects, a low-profile 
approach to their relationship had protected them.  He said that 
KAR's current U.S. partners heightened the danger for the Iraqis 
 
KIRKUK 00000082  002.2 OF 002 
 
 
working with them by micromanaging to the extent of endangering 
locals on site.  Karim said that a low-profile relationship 
allowed people to work and make a living safely, while 
completing the work successfully. 
 
Biography Notes 
--------------- 
 
¶9. (SBU) Baz Karim is a member of the Kurdish Barzengi Tribe, 
which he describes as 'commercial' and not interested in 
politics.  He shied away from political discussion when asked 
about interference by PUK and KDP in commercial affairs and 
corruption.  The Barzengi are a very large tribe, split 
throughout Sulaymaniyah, Erbil, and Kou Senjaq, and have a good 
relationship with both the Barzani and Talabani tribes. 
According to Karim, his grandfather, Shaykh Mahmud, would have 
been king if the British had not given the throne to King 
Faisal. 
 
Comments: 
--------- 
 
¶10. (C) It is significant that the Koia Refinery has reached the 
bidding stage.  However, the project is unlikely to win funding 
unless parties at least agree that the same party who pays for 
the refinery -- whether that is the central government or the 
KRG -- gets to keep it.  Karim's request for advocacy for the 
Al-Nahrian refinery bid has merit, if there are no competing 
American bidders now and the possibility of Chinese bidders if 
the process reverts back to the bidding stage.  End Comments. 
ORESTE