Japanese factory builder JGC Corp. signed a 400 billion yen ($ 3.8 billion) deal with an Iraqi state-owned company to build a complex at one of Iraq’s largest refineries as part of the country’s reconstruction.

The project in Basra, southern Iraq, will be funded by low-interest yen loans from the Japan International Cooperation Agency, the development aid arm of the Japanese government. This is one of the agency’s biggest funding projects in the Middle East.

About 7,000 local skilled workers will be employed to build the heavy oil extraction complex to produce lighter, more valuable oil, such as gasoline. According to the JGC, another 2,000 jobs are expected to be created to operate the refinery, which is expected to be completed in 2025.

An undated photo shows the Basra oil refinery in southern Iraq. (Photo courtesy of Japan International Cooperation Agency) (Kyodo)

Creating jobs and improving public services are among the main issues raised by participants in the large-scale anti-government protests that swept through the capital and southern Iraq last year and earlier this year, said Akiko Yoshioka, senior analyst specializing in contemporary Iraqi politics. at the Institute of Energy Economics, Japan.

“This kind of big development project will contribute to the local economy,” she said.

According to a report by the British multinational oil and gas company BP plc, Iraq ranks fifth in the world for its oil reserves, at 145 billion barrels, while producing 4.78 million barrels per day.

However, the country is heavily dependent on petrol imports for several reasons, such as the destruction of a refinery in Baiji, Iraq’s largest, in 2014 by Islamic State militants during a battle with the Islamic State. Iraqi government forces. Many other refineries have also ceased to function due to aging and attacks.

Iraq’s oil industry provides around 90 percent of the state’s revenue, making it the country’s key industry and one of the only sources of foreign exchange.

Photo provided shows Yutaka Yamazaki (L, front row), head of JGC Corp. and his counterpart Husam Weli of South Refineries Co. sign an agreement at a ceremony in Baghdad on October 1, 2020. (Photo courtesy of Japan International Cooperation Agency) (Kyodo)

The agreement between JGC and South Refineries Co. will contribute to Iraq’s goal of increasing its self-sufficiency in gasoline. The refinery upgrade will include increasing gasoline production from the current 30,000 barrels per day to 49,000.

“Although Iraq is a large oil-producing country, it is highly dependent on imports of petroleum products, which is an urgent matter for the country to improve its self-sufficiency rate,” Yoshioka said.

Built by a Japanese company, the Basra refinery has been operating since 1979. It is designed to handle 210,000 barrels per day of flow, a measure of the amount of petroleum products produced by a single refinery unit over 24 hours of operation. But the amount of production has decreased due to aging.

“We recognize that this is our flagship project. It will contribute to the whole Iraqi economy and create jobs for them, which will lead to the stability of the country,” the JICA official said in project manager.

Between 1970s and 1980s, thousands of Japanese worked in Iraq, and this project will be a symbol of “Japan is back,” said the JICA official.

Iraqi Oil Minister Ihsan Abdul Jabbar Ismail also participated in the signing in Baghdad on Thursday, while Prime Minister Mustafa Al-Kadhimi attended a meeting regarding the project.

The Iraqi government expects the project to bring economic benefits to Basra, where protests often take place, the official said.

An undated photo shows the Basra oil refinery in southern Iraq. (Photo courtesy of Japan International Cooperation Agency) (Kyodo)

JICA also predicts that a more stable Iraq will improve overall stability in the region, which is also essential for Japan’s energy security.

“The Japanese government has managed many yen loan projects in Iraq, but Japanese companies have not always received contracts,” Yoshioka said. “Having Japanese companies directly involved in projects that contribute to the local community is a great way to show that Japan supports them.”

The project began in 2008 as part of Japan’s efforts to restore the country. However, it faltered as ISIS’s influence increased. The Iraqi government declared the end of the war on ISIS in December 2017, but is still dealing with its remains and other issues, including anti-government protests.


Associated coverage:

Iraqi oil project blocked by IS to kick off this year with Japanese help


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