According to the Oil and Gas Journal, Iraq's refining capacity was 597,500 bbl/d as of January 1, 2005, compared to a nameplate capacity of 700,000 bbl/d. Overall, Iraq has eight refineries, none of which were damaged during the March-April 2003 war itself. The three largest refineries are the 310,000-bbl/d Baiji, 150,000-bbl/d Basra, and 110,000-bbl/d Daura plants.
In May 2005, two small companies - Hydrocarbon Supply Ltd. of Texas and Prokop of the Czech Republic -- signed contracts to upgrade Daura at a cost of $110 million. Capacity at the plant is to be increased to 170,000 bbl/d. Also, on April 1, 2005, Iraq also announced plans to build a new oil refinery in Basra, with a capacity of 250,000-300,000 bbl/d. Reportedly, eight companies have bid to build the refinery.
According to former Oil Minister Issam Chalabi, Iraqi refineries currently are operating at only 50 percent-75 percent of capacity, forcing the country to import around 200,000 bbl/d of refined products, at a cost of $200-$250 million per month. This does not include the additional cost of steep government subsidies on the consumer price of Gasoline, which had been priced under 10 cents per Gallon prior to December 2005 (violent demonstrations broke out in that month after steep price increases were announced).
It is estimated that, overall, direct and indirect oil subsidies cost Iraq $8 billion per year. Subsidies also encourage illegal smuggling of oil out of Iraq, and exacerbate shortages within the country. In order to reduce Iraq's need for oil product imports, significant investment will be needed to perform refinery upgrades (Iraq had identified dozens of such projects prior to the war) and possibly to build new refineries.
In early December 2005, construction began on two new refineries � a 140,000-bbl/d facility in Karbala province and a 30,000-bbl/d plant at Diwaniya (south of Baghdad). The two plants are expected to cost around $1.5 billion and $300 million, respectively, and to be completed within three years. Iraq has also issued tenders for a 70,000-bbl/d refinery at Koya in the Kurdish region, and a 140,00-bbl/d facility at Nahrain, south of Baghdad.
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