Japan International Cooperation Agency (JICA) announced on Thursday that it signed a loan agreement with Iraq to provide an ODA loan of up to 203,060 million yen ($1.4 billion), which constitutes the fifth tranche of its kind, for the Basrah Refinery Upgrading Project.

The project seeks to improve Iraq’s capacity for producing oil products and the quality of such products by installing a new fluid catalytic cracking (FCC) complex in the Basrah Refinery, one of the biggest oil refineries in the country, located in Basra Governorate, JICA said in a press statement.

The FCC complex in Iraq will enable the country to produce oil products that meet international environmental standards, the statement noted.

In a separate statement, Iraq’s Minister of Finance, Taif Sami, said he refinery will help revitalise the private sector and the energy industry and provide job opportunities for the Iraqi people.”

The JICA said the loan has an interest rate 0.2 percent for the project component and 0.01 percent for the consulting component. The repayment period is 40 years with a grace period of 10 years.

Contracts for detailed design and EPC package were already awarded and the project is scheduled for completion in August 2025.

The main contract is Japan tied and subcontracting is general untied under the Special Terms for Economic Partnership (STEP) applicable to the ODA loan.

JICA has provided four ODA loans for the Basrah Refinery Upgrading Project, of which the first tranche was signed in October 2012 with the amount of JPY42,435 million, the second in June 2019 with JPY110,000 million, the third in October 2021 with JPY32,700 million, and the fourth in December 2022 with JPY120,000 million yen.

Although Iraq has fifth biggest crude oil reserves ranked fifth in the world, its domestic demand for oil products, such as gasoline and diesel, depends heavily on imports from other oil-producing countries since many of the oil-refining facilities are out of service or deteriorating and thus operate below capacity due to long-lasting conflicts.

(Writing by Majda Muhsen; Editing by Anoop Menon)

(anoop.menon@lseg.com)

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