BAIJI, Iraq: Iraq will ask foreign companies to bid on a more than $1bn contract to build and install a fluid catalytic cracker (FCC) at the country’s biggest refinery, Baiji, a refinery executive said.

The FCC contract is part of efforts by the war-torn country to increase domestic output of gasoline and other fuels to meet rising local demand and allow for exports of refined products within five years, the refinery’s general director, Ali al-Ubaidi, said.

“The Oil Ministry will invite some foreign refining companies, among them KBR, UOP, Axens and Stone and Webster, to bid in mid-2009 to build a fluid catalytic cracker,” Ubaidi said in an interview during a visit this week to the sprawling plant.

“The value of the contract is more than $1 billion, and hopefully the work will be finished in five years’ time.”

As violence begins to decline in Iraq almost six years after the US-led invasion, Iraq has begun to speed up efforts to revive its investment-starved oil sector.

Its oil refining infrastructure — it has three major refineries — is antiquated and its operations are often disrupted by theft or sabotage.

Baiji in the north is the biggest plant, with a nameplate capacity of 320,000 barrels per day, but it operates at a lower rate due to inadequate equipment.

This year, for the first time since the 2003 invasion to topple Saddam Hussein, Iraq is refining enough gasoline for domestic transportation, and the additional investment in Baiji will allow it eventually to export some, Ubaidi said.

“It’s a little bit early to talk about exporting gasoline components now, but with the completion of the FCC in five years, we will be able to discuss exporting the surplus,” he said.

Ubaidi said Baiji was currently operating at 80 percent capacity. The FCC, and a new hydro cracker, which is being tested and will come onstream next month, will help to take it to 100 percent.

The hydro cracker would increase output of gas oil by 3 million litres per day, or around 18,869 bpd, from current levels of around 20 million litres per day (125,796 bpd), and of 10 million litres during 2008, he said.

Gas oil, which includes kerosene, diesel, jet fuel and heating oil, is made from crude oil by a crude distillation unit. It can be fed to an FCC unit for refining into gasoline.

One of the old refinery-related contracts being revived dates back as far as 1988 and was delayed because of the first Gulf War. The $45 million contract for Czech company Chemoprojekt, Czech Design, Engineering and Contracting Company to install an isomerisation unit is half completed and will be concluded in 2010, Ubaidi said.

The isomerisation unit will allow Baiji to produce a super high-quality fuel that pollutes less. One of the problems that has afflicted Baiji is theft and smuggling. Iraqi officials say stolen gasoline production from Baiji cost the country around $2bn in 2006/07.

A lot of that money was used to fund the Sunni Arab and Al Qaeda-inspired insurgency against the US invasion, Ubaidi said. US troops patrol the refinery now. The Oil Ministry has contracted foreign companies to submit bids to install surveillance equipment at the plant to help curtail smuggling, he said.

The value of the contract is about $20m, and the name of the winning company will be announced in March.

The sectarian violence between Sunni and Shia Muslims that almost tore Iraq apart but which has finally begun to subside also affected output at Baiji, because many workers were forced to leave the refinery because they were Shi’ites.

“One of the factors affecting production in Baiji was the departure of many experienced workers for sectarian reasons. It’s been difficult to replace them, but we have to go on with our work,” said the manager of the North Refinery at Baiji, chief engineer Riyadh Al-Samarriae.

Not all went into hiding.

“I lost my two sons three years ago because we were Shia, but I decided to stay,” a senior technician, Abbas Al-Timimi, told Reuters. “I got my first job at this refinery, and I will end my life close to it.”