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R 231525Z APR 09
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 2817
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UNCLAS SECTION 01 OF 02 BAGHDAD 001096 
 
SIPDIS 
 
SENSITIVE 
 
DOE FOR GEORGE PERSON; STATE ALSO FOR EEB AND NEA/I 
 
E.O. 12958: N/A 
TAGS: EPET EINV ENRG IZ
SUBJECT: Nasiriyah's Old and New Refineries 
 
REF: Baghdad 47 
 
BAGHDAD 00001096  001.2 OF 002 
 
 
This is a PRT Dhi Qar reporting cable. 
 
Sensitive but unclassified; contains business proprietary 
information.  Please protect accordingly. 
 
¶1. (SBU) Summary:  PRT Dhi Qar Deputy Team Leader and visiting 
Embassy Baghdad EconOff met with Nasiriyah Refinery manager Abdul 
Hasan al-Lawi on April 12.  The 30,000 barrel per day Nasiriyah 
Refinery is representative of the small refineries scattered 
throughout Iraq.  Lawi came across as a dedicated manager, 
struggling to operate his refinery to meet local and national needs. 
 The Ministry of Oil, however, has awarded a contract for the design 
of a new refinery to be constructed in Nasiriyah which, at 300,000 
barrels per day, will be Iraq's largest.  End Summary. 
 
Nasiriyah Refinery's Current Operations 
--------------------------------------- 
 
¶2. (U) Lawi said the Nasiriyah Refinery has a modest 30,000 barrels 
per day (bbl/d) capacity, consisting of three 10,000 bbl/d trains 
that refine crude oil into kerosene, diesel, and naphtha for 
gasoline.  Two of the trains were commissioned in 1980 and the Iraqi 
Ministry of Industry and Minerals had locally fabricated the third, 
commissioned in 2003.  (Note: U.S. firm Howe-Baker manufactured 14 
skid-mounted units in the 1970s, which still operate in various 
locations.  The Ministry of Industry and Minerals copied the design 
to manufacture more.  A Ministry of Oil official told us that the 
distillation units can handle all specifications of Iraqi crude oil. 
 End note.)  The refinery's basic atmospheric distilling unit cannot 
process crude oil further, so 55 percent of the output is in the 
form of heavy fuel oil (HFO).  The refined product generally 
supplies the needs of Dhi Qar Province (where Nasiriyah is located), 
but a fourth train produces 400 tons per day of asphalt, which is 
shipped throughout Iraq for road construction and repair. 
 
¶3. (U) The asphalt train is operating at only 60-70 percent of 
capacity, so it utilizes only 7,000 barrels of the 15,000 barrels of 
HFO produced daily.  Four trucks can load the asphalt 
simultaneously.  Lawi was looking forward to receiving natural gas 
to heat crude oil for the refinery's general operation, saying that 
a 24-inch pipeline was supposed to be repaired and operational in 
about two months time.  (Note: The provincial manager of the Oil 
Pipeline Company was not as optimistic that this timeline would be 
met, when we met with him later.  End note.)  The use of natural 
gas, instead of HFO, would improve the efficiency of the refinery, 
increasing output.  During a tour, we saw an inoperative merox 
(mercaptan oxidation) unit, which Lawi said was unneeded, since the 
distillery produced "sweet" kerosene, which did not require 
desulphurization. 
 
¶4. (U) The Nasiriyah refinery's HFO was shipped by 6-inch pipeline 
to fuel the Nasiriyah power station and to provide heating for 
industrial establishments.  The crude oil feedstock arrived via the 
20-inch strategic pipeline.  Lawi noted that its uneven quality 
created maintenance problems.  The crude often had a high water, 
sulfur, and salt content and contained particulate matter.  Lawi 
said the Ministry of Oil had contracted for the design of a 
reforming unit in October 2008, which would provide the refinery 
with the capability of processing naphtha into gasoline.  The design 
would take six months and then the $68 million reforming unit's 
installation would be another 30 months.  The Nasiriyah refinery 
should have four trains operational, however, to utilize the 
Qshould have four trains operational, however, to utilize the 
reforming unit optimally. 
 
Bio Details and Atmospherics 
---------------------------- 
 
 
¶5. (SBU) Originally from the Basrah area, Lawi said he had worked in 
Nasiriyah since 1985, rising to the position of plant manager in 
¶2003.  The former manager had been a member of the Baathist party, 
and so had been removed.  He had also had problems with his health, 
experiencing difficulty walking.  The refinery had not been damaged 
during Operation Iraqi Freedom and had not experienced any terrorist 
attacks.  Lawi noted that the problem with the pipelines had 
resulted from thefts of crude oil.  When thieves bored into the 
crude oil pipeline, the resulting leak would dissolve the tar 
coating the natural gas pipeline as well, causing it to corrode. 
The refinery employed 1,000 people, of which 160 were engineers. 
Lawi admitted that only half of the staff was really required.  The 
Italian Army had provided some assistance earlier, but ours was the 
first visit to the refinery from the PRT. 
 
A New Refinery in Nasiriyah 
 
BAGHDAD 00001096  002 OF 002 
 
 
--------------------------- 
 
 
¶6. (SBU) In early December 2008, the MoO signed four Front End 
Engineering and Design (FEED) contracts with foreign firms for new 
refineries, including a $128 million contract to U.S.-registered 
firm Foster Wheeler for a 300,000 bbl/d refinery in Nasiriyah 
(reftel).  MoO official Abdul Hassan al-Attabi told the media that 
the refinery would provide 10,000 jobs and process crude from the 
nearby Nasiriyah, Gharraf, and Rafidain oil fields.  The MoO 
informed us separately that the Nasiriyah Refinery design is 
supposed to include a fluid catalytic cracking and hydrocracking 
units, which provides the capability to produce a higher proportion 
of lighter distillates, and an isomerization unit to produce 
additives to turn naphtha into high-octane gasoline.  While some 
news reports claim the new refinery will be the largest in the 
Middle East, it will certainly be the largest in Iraq.  (Note: 
Although the Bayji Oil Refinery complex has a rated capacity of 
310,000 bbl/d, the new Nasiriyah Refinery will certainly out-produce 
it, since the aging Bayji facility produces at only about 75%-80% 
capacity.  The four new contracts, for a total additional capacity 
of 740,000 bbl/d, would more than double Iraq's refinery output. 
End note.) 
 
¶7. (U) Lawi noted that there would not necessarily be a connection 
between the existing refinery and the new Nasiriyah refinery.  He 
said the new refinery would be built on a plot of land 10 kilometers 
south of the existing one and modestly refused to speculate whether 
he would be promoted to head the new operation.  The two refineries 
might report separately to South Refinery Company headquarters, or 
the smaller existing refinery operation might be subordinate to the 
new refinery. 
 
¶8. (SBU) Comment:  Deputy Oil Minister Ahmad al-Shamma remarked to a 
reporter that the FEED contract would not give Foster Wheeler the 
inside track for actual refinery construction.  In fact, we suspect 
the Engineering, Procurement, and Construction (EPC) contract might 
go to a Japanese company.  Italy's Eni, Spain's Repsol, and a 
Japanese consortium led by Nippon Oil are competing for an EPC 
contract to develop the Nasiriyah oil field.  A PRT Dhi Qar contact 
relayed, based on conversations with Eni representatives, Eni's 
confidence that it would win the award and that, as a consolation, 
Nippon Oil would receive the Nasiriyah refinery EPC contract.  When 
EconOff ran this scenario past a Japanese Embassy 
Minister-Counselor, he agreed that "some kind of deal" might be in 
the works.  In addition, a Nippon Oil executive told the media on 
the margins of the December Energy Expo at Baghdad International 
Airport that Nippon Oil had submitted a proposal to construct an oil 
refinery worth $5-10 billion, and, in an April 2009 news story, 
Iraqi Vice President Adil Abd al-Mahdi said he would travel to Japan 
to discuss construction by Japanese companies of a 300,000 bbl/d 
refinery in Dhi Qar Province.  End comment. 
 
Butenis