BAGHDAD, Oct. 19 (UPI) -- Iraq is driving to build new oil refineries to increase capacity by 740,000 barrels per day as its postwar economy swells, part of a multibillion-dollar program under way across the Persian Gulf region.
The Organization of Arab Petroleum Exporting Countries reported in June that Arab countries' refining capacity is expected to increase by 5 million bpd to 12.4 million in the next three years.
More than half the refineries in the region were built before the 1990s. "So refiners have had to work hard to keep up with higher global emission standards," the Middle East Economic Digest reported.
"They are also attempting to refine heavier crudes, which will account for an increasingly bigger share of production over time."
Rapidly growing populations and rising domestic demand for refined products are far outstripping the refining capabilities of these countries, the largest crude oil-producing region in the world.
This is particularly true in Iraq, where antiquated, war-battered oil industry infrastructure and a serious security problem combine to form a major threat to national reconstruction.
The extent of the security dangers were illustrated by bombings that knocked out the Baiji refinery near Baghdad, with a capacity of 150,000 bpd, in February. Other refineries have also been attacked by insurgents.
The refinery expansion program is intended to reverse the global trend of having the main downstream sectors in areas of high consumption, such as the United States, Europe and Asia.
Much of the additional refining capacity will be in the gulf region, led by Saudi Arabia, the United Arab Emirates and Kuwait.
"With the huge program of investments in new refineries, upgrades and expansions, the gulf states are set to capture more value from their hydrocarbon resources," MEED reported.
"The projects will simultaneously help to cut the region's dependence on imported refined products and boost exports."
Plans to increase Iran's refining capacity are based largely on upgrading and expanding existing plants. But these are likely to be impeded because international economic sanctions imposed by the United Nations in June 2010 have scared off potential foreign investors.
Iraq's 10 existing refineries have a combined capacity of more than 900,000 bpd but actual production is usually as much as 40 percent below that.
Baghdad's master plan unveiled in 2010 was to build four refineries, costing $23 billion, at Kirkuk in the north, Karbala in central Iraq, Daura and Nasiriyah in the south. But in April the government announced plans for another three refineries, each with a capacity of 50,000 bpd.
The largest facility, costing $8 billion, will be at Nasiriyah, with a capacity of 300,000 bpd.
Like other new refineries planned across the region, Nasiriyah will include a hydrocracker unit, that breaks down the complex carbon molecules in crude oil to produce more light and medium distillates for which there is growing global demand.
The Baiji, Basra and Daura refineries are being upgraded with cracker units.
Production of light "sweet" crude, like that produced by Libya and West Africa and widely sought in the United States and Europe, is likely to decline soon.
That will leave refineries to handle heavier crude that need much more processing to produce products like jet fuel, diesel and high-grade gasoline.
The region's older refineries don't have this capability and cannot meet the domestic demand for refined products, which is growing at a rate of 6 percent a year in some Middle Eastern countries.
MEED reports that many of the new refineries planned in the Persian Gulf will be able to process heavy crude, "a key consideration given that oil will become heavier as firms have to drill deeper for it."
The gulf states have a combined refining capacity of 6.25 million bpd through crude distillation units the first step in the refining process.
All told, MEED says, "there is $250 billion worth of projects planned or under way in the gulf's downstream oil sector."
Of these, Saudi Arabia has projects worth $60 billion, the most ambitious program in the region. That includes a $10 billion refining and petrochemical complex at Rabigh, a 50-50 venture between state-owned Aramco and Japan's Sumitomo Chemicals.
The kingdom plans to add another 1.2 million bpd of CDU capacity by 2016 at plants in Jubail, Yanbu and Jizzan, each with a capacity of 400,000 bpd.