Iraq needs $20-25 bln for refineries-oil official

By John Irish

DUBAI, Sept 8 (Reuters) - Iraq will require up to $25 billion in investment to expand its refining capacity over the next five to seven years, an Iraqi oil official said on Saturday.

Dathar al-Khashab, director-general of the state-run Midland Refineries Co, said that estimate included expanding Iraq's five existing refineries and building four refineries, as well as the cost of crude pipelines, product pipelines and depots.

"The huge surge of prices in construction costs means this figure could be moderate," he said on the sidelines of a conference in Dubai.

"This could be done from internal financing and the other way is through joint ventures, inviting international companies to come in and offering a lot of incentives to do so."

Iraq has the world's third-largest proven oil reserves but its refineries have suffered from a decade of sanctions and four years of violence since the U.S.-led invasion of 2003, which has hampered investment.

In 2002, Iraq had total installed refining capacity of some 590,000 bpd, operating at 90-95 percent, Khashab said. The refineries were operating at 60 percent in 2005, when Iraq suffered a gasoline shortage of 10-12 million litres, he added.

While that has eased, Khashab said, demand was likely to rise again if the security situation improves. The shortages have already resulted in a thriving black market in fuel.

Khashab said each of the existing refineries, would cost $1.5 billion to expand.