The Japan International Cooperation Agency (JICA) signed a loan agreement last month with the Government of the Republic of Iraq in Baghdad to provide a Japanese ODA loan of up to 203,060 million yen for the Basrah Refinery Upgrading Project (V).
This project will 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.
Although Iraq has high oil-producing potential, with its 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. This is because many of the oil-refining facilities in Iraq are currently out of service or deteriorating and thus operate below capacity due to long-lasting conflicts.
By installing the FCC complex in Iraq, this project will enable the country to produce oil products that meet international environmental standards, strengthening the oil sector — which dominates Iraq’s economy — and thereby contributing to the country’s economic and social reconstruction. Moreover, this project will also contribute to the achievement of SDGs (Sustainable Development Goals) Goals 7 (Affordable and clean energy) and 9 (Industry, innovation and infrastructure).
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 42,435 million yen, the second in June 2019 with 110,000 million yen, the third in October 2021 with 32,700 million yen, and the fourth in December 2022 with 120,000 million yen. This project is the fifth tranche of its kind.
Special Terms for Economic Partnership (STEP) will apply to the Japanese ODA loan for this project, and Japan’s advanced technical know-how and engineering skills will be utilized at the FCC complex being constructed under the project.
STEP refers to special assistance terms for promoting the visibility of Japanese aid through a transfer of outstanding Japanese technology and expertise to developing nations. The main contract is Japan tied and subcontracting is general untied. The main agreement partner must generally be a Japanese company, an overseas subsidiary of a Japanese company, or a joint venture between a Japanese company and the borrowing country where the Japanese company is the lead partner, although under certain conditions a joint venture between a Japanese company (which is the lead partner of the joint venture) and an affiliated company (as accounted under the equity method) of a Japanese company may be the main agreement partner.
