Shell makes Iraq the largest Petrochemical Producer in the Middle East

Iraq’s Ministry of Oil and Ministry of Industry and Minerals held a series of meetings over the past week to kick-start the multi-billion dollar Nebras petrochemical mega plant development project, originally agreed in principle with Royal Dutch Shell (Shell) in 2012.

In broad terms, given its huge oil and gas reserves, Iraq could be a petrochemicals industry powerhouse and Nebras would be the perfect vehicle, under Shell’s leadership, to begin to realize this potential.

For Shell, the Nebras project offers a natural synergy for the gas feedstock that comes from its 44% stake in the US$17 billion 25-year Basra Gas Company (BGC) project.

The BGC is designed to enable Iraq to increase its energy independence and to achieve economic diversification by capturing currently flared gas from the fields of Rumaila, West Qurna 1, and Zubair, in the first instance.

Already, as of last year, the BGC reached a peak production rate of 1035 million standard cubic feet per day (mmscf/d), the highest in Iraq’s history and sufficient gas to generate approximately 3.5 gigawatts (GW) of electricity – enough to power three million homes.

The BGC is also responsible for currently supplying around 70% of Iraq’s liquefied petroleum gas (LPG) and for enhancing Iraq’s export capabilities, which helped the country to become a net exporter of LPG from 2017.

For Iraq, the creation of a value-added petrochemicals sector generating a sustainable stream of export revenues to add to its basic drill and sell crude oil operation would enable it to avoid the sort of cash-crunches that have become commonplace every year in the country, sparking violent protests and deaths.

Such new revenue streams would also allow Iraq to avoid having to breach OPEC+ production caps in order to plug short-term financial holes and then have to suffer the consequences of having to make up the overproduction by cutting back on production in subsequent months.

The original design plans for Nebras – formulated between Shell and the Iraq Ministry of Oil and Ministry of Industry and Minerals – were for a project that could produce at least 1.8 million metric tonnes per year (mtpa) of various petrochemicals.

This would make it Iraq’s first major petrochemicals project since the early 1990’s and one of only four major petchems complexes across the entire country.

The others – Khor al-Zubair in the south, Musayeb near Baghdad, and the Baiji refinery complex in the north – are operated by Iraq’s State Company for Petrochemical Industries.

In January 2015, then, Shell released the statement that Iraq’s cabinet had authorized the Nebras project and that the company would work ‘jointly with the Ministries of Oil and Transport to develop a joint investment model for a world-scale petrochemical cracker and derivatives complex in the south of Iraq’.

The then-Industry Minister, Nasser al-Esawi, told a news conference at the time that the Shell-run Nebras petrochemical complex would come online within five to six years and would make his country the largest petrochemical producer in the Middle East.

“Shell has done a really good job so far with the BGC, especially in getting the gas volumes up to over a billion standard cubic feet per day, which means that the ethane can be extracted on a sustainable and reliable basis, and that allows for sufficient volume for a major petchems plant to be viable.

Ethane needs to be the initial feed stock for Iraq’s first few plants in the same way that it was in the development of Saudi Arabia’s master gas system that captured associated gas, which was then fractionated and supplied as primary feed-stock to the flagship Jubail Industrial City,” he underlined.

The highest concentration of ethane [up to 10% plus] is usually found in associated gas streams, which Iraq has a lot of, and processing ethane produces ethylene with few by-products [mainly fuel gas] to process and manage.

This reduces the capital required for construction and minimizes the complexity of the logistics and distribution requirements, which will be important factors in Iraq’s early stage build-out of a viable petchems industry.

But as the industry and corresponding infrastructure grows, heavier feed streams can be utilized, as happened with the use of propane, butane and naphtha in Jubail.

A world-scale facility for ethylene – one of the most in-demand petchems products in the world, especially from China – is in the range of 1.0 to 1.5 million tons of ethylene production and a 1.0 million ton per year ethylene facility would require a supply of roughly 1.3 million tons per year of ethane, he highlighted.

Additionally, this would need to be a sustainable and reliable supply for at least 20 to 25 years and, to build out all of the necessary parts for a functioning world-class petchems sector in Iraq would require around US$40-50 billion

A world-scale facility for ethylene – one of the most in-demand petchems products in the world, especially from China – is in the range of 1.0 to 1.5 million tons of ethylene production and a 1.0 million ton per year ethylene facility would require a supply of roughly 1.3 million tons per year of ethane, he highlighted.

Additionally, this would need to be a sustainable and reliable supply for at least 20 to 25 years and, to build out all of the necessary parts for a functioning world-class petchems sector in Iraq would require around US$40-50 billion.

The 300,000 bpd refinery build near the Zubair field being discussed with ENI – would also mean that Iraq could start to significantly reduce its dependence on Iran for imports of gas and power.

This, in turn, would allow Iraq to re-engage more fully with the US regime, with the implications for financing that this would have

Oil Price.com / ABC Flash Point News 2020.