The $US518 million contract awarded to Leighton Offshore forms part of the Crude Oil Export Facility Reconstruction Project – otherwise known as the ‘Sea Line Project’ – which aims to stabilise and expand Iraq’s crude oil export capacity by constructing a pipeline connecting crude oil storage facilities to the offshore crude oil export terminal at Fao, Basrah.
The project is financed and supported through the Japanese Official Development Assistance Loan by the Japan International Co-operation Agency (JICA).
Leighton Offshore Chief Executive Officer Peter Cox said, “This is an extremely important project for Iraq and we are very pleased to be working with the Iraq South Oil Company to assist them to achieve their redevelopment goals.”
Background on the industry
In Iraq, the oil sector is the largest industry, accounting for more than 60 per cent of its gross domestic product and 95 per cent of its fiscal revenue, according to the National Development Strategy 2007–10. It is for this reason that, in the same document, the Iraqi government has designated the development of the oil sector as one of the highest priorities for strengthening the foundations of economic growth.
At the time of project inception, the government planned to gradually increase crude oil production in the southern region – which at the time accounted for 80 per cent of crude oil exports – from 2 MMbbl/d to 5.3 MMbbl/d. This required additional investment in developing oil-related facilities, including crude oil production facilities and export terminals.
According to JICA, most of the oil-related facilities in Iraq were built in the 1970s. As several conflicts in the area have prevented new investment and adequate maintenance over the years, oil facilities have deteriorated leading to a lack of reliability and capacity in those facilities.
JICA says the offshore crude oil export facility in Fao, Basrah, is facing a serious decline in the reliability of its operation, and given the plan to expand crude oil production capacity in the coming years, its current capacity is highly insufficient.
