GAS/OIL REFINERY TO BE BUILT IN KURDISH REGION

C O N F I D E N T I A L SECTION 01 OF 02 KIRKUK 000082

SIPDIS

SIPDIS

BAGHDAD FOR ECON, POL, FCS, NCT, FCS, USAID

E.O. 12958: DECL: 4/10/2016
TAGS: EPET ENRG ECON EINV PGOV PINR IZ
SUBJECT: GAS/OIL REFINERY TO BE BUILT IN KURDISH REGION

KIRKUK 00000082 001.2 OF 002


CLASSIFIED BY: Scott Dean, Acting Regional Coordinator, REO
Kirkuk, DoS.
REASON: 1.4 (b),(d)




1. (C) Summary: Iraqi KAR Group CEO Baz Karim discussed bids
for two new oil refineries, including the first in the Kurdistan
region, slated for Koia, Sulaymaniyah Province. Karim also
requested advocacy from the United States for KAR's bid on the
proposed $1.3 billion Al- Nahrian Refinery, in central Iraq,
submitted in partnership with a consortium of U.S. companies.
Also, Karim alleged that U.S. business partners' higher-profile
relationships with KAR have led to a spate of recent kidnappings
of KAR employees. End Summary.


2. (C) Iraqi businessman Baz Karim, CEO of KAR Group, met with
USAID Regional Representative Brad Camp and IPAO to discuss
KAR's current and proposed projects in the oil industry. Karim
said that he was informed personally by the Director of the Oil
Institute, Sarbaz Hawrmy, that all ten of the oil development
projects in the region would be tendered out within the next six
months, including the Koia and Al-Nahrian refineries. Karim
said the Ministry of Oil had budgeted $300 million each to Koia
and Al-Nahrian refineries for the first stage of construction.

Koia Refinery - A First for the Kurdistan Region
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3. (C) According to Karim, the Ministry of Oil in Baghdad would
select one of six bids tendered for the Koia Refinery by the end
of April. The refinery would be located 20 km southwest of Koia
city. He said the central government had agreed to pay for the
project, while the Kurdish Regional Government (KRG) in
Sulaymaniyah would eventually take it over. Karim estimated
construction would take at least 3 years. He said well-placed
Kurds in Baghdad were pushing for the Koia refinery, but that it
was unclear if non-Kurd Iraqis supported it or not.


4. (C) Karim said the Koia Refinery was expected to have a
refining capacity of 70,000 BBL/D of crude oil. The Taq Taq Oil
Fields would supply 30-40,000 BBL/D, which currently were sent
to Turkey for refining. The refinery would produce regular and
premium gasoline, kerosene, gas oil, LPG and fuel oil. KAR
would be responsible for procurement, engineering, and
management of construction.

Al-Nahrian Refinery: Request for Advocacy
--------------


5. (C) Kamrin asked for U.S. advocacy on KAR's bid for the $1.3
billion Al-Nahrian Refinery. KAR had formed a "dream team"
consortium with U.S. companies CBI Howe-Baker, ABB Lummus
Global, Mustang International, River, and Turner & Mason. He
said that he did not believe there would be the minimum three
bidders required by the Ministry of Oil, which would send the
bid back to the tendering stage and risk the $300 million
budgeted to the project for 2006. (Subsequently, Karim said
there were no other bidders.) Karim said he was concerned that
if the money were not allocated this year, it would "disappear."
He said the government could legally waive the "three bid"
requirement. An additional bidding cycle would probably open
the door to a Chinese bid.


6. (C) According to Karim, the Al-Nahrian Refinery is to stand
70 km northwest of Baghdad. He said the refinery would be
capable of processing 140,000 BBL/D of Basra regular crude oil
or Mishrif crude oil and produce regular and premium gasoline,
kerosene, gas oil, LPG and fuel oil. KAR and the members of the
consortium would each be responsible for the engineering and
construction of a portion of the site's 17 processing units and
supporting utility and offsite facilities.

Kidnappings Issues Plague KAR
--------------


7. (C) In three recent instances, Karim said, kidnappers had
targeted KAR employees. Earlier this year, the manager for a
project near Hawijah was kidnapped for two weeks. KAR did not
negotiate with kidnappers; however, he said, the family
negotiated the ransom down from $150,000 to $35,000 and KAR gave
them the funds. Also, the project manager of a major KAR fiber
optics project in Baghdad was kidnapped and killed, despite
payment of ransom. Finally, two engineers were kidnapped, but
rescued at a U.S. checkpoint when the cars were searched.


8. (C) Karim said that in KAR's previous partnerships with USAID
and the U.S. military on reconstruction projects, a low-profile
approach to their relationship had protected them. He said that
KAR's current U.S. partners heightened the danger for the Iraqis

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working with them by micromanaging to the extent of endangering
locals on site. Karim said that a low-profile relationship
allowed people to work and make a living safely, while
completing the work successfully.

Biography Notes
--------------


9. (SBU) Baz Karim is a member of the Kurdish Barzengi Tribe,
which he describes as 'commercial' and not interested in
politics. He shied away from political discussion when asked
about interference by PUK and KDP in commercial affairs and
corruption. The Barzengi are a very large tribe, split
throughout Sulaymaniyah, Erbil, and Kou Senjaq, and have a good
relationship with both the Barzani and Talabani tribes.
According to Karim, his grandfather, Shaykh Mahmud, would have
been king if the British had not given the throne to King
Faisal.

Comments:
--------------


10. (C) It is significant that the Koia Refinery has reached the
bidding stage. However, the project is unlikely to win funding
unless parties at least agree that the same party who pays for
the refinery -- whether that is the central government or the
KRG -- gets to keep it. Karim's request for advocacy for the
Al-Nahrian refinery bid has merit, if there are no competing
American bidders now and the possibility of Chinese bidders if
the process reverts back to the bidding stage. End Comments.
ORESTE