The Iraq vacuum bottom residue (kerosene, VGO and bitumen) market was valued at USD 3113.02 Million in 2025. The industry is expected to grow at a CAGR of 8.60% during the forecast period of 2026-2035 to reach a value of USD 7103.63 Million by 2035. One of the primary factors that substantially influences the growth of the Iraq vacuum bottom residue market is the need for the heavier residues to be converted to lighter fractions in order to meet the changing fuel quality and environmental standards.
Iraq vacuum bottom residue (kerosene, VGO and bitumen) market landscape is significantly being influenced by the implementation of stricter fuel quality regulations. For the refinement of Iraq, the international and regional standards that are gradually converging towards the Euro 5 standards for both emissions and sulphur are turning into a big challenge. That is why Iraqi refiners have to produce less and less of the low-grade fuel oils and, at the same time, more of the higher-value products which are environmentally friendly.
In this context, the pressure coming from regulations is being alleviated by investment in refinery modernization. A hallmark of such an upgrade was the completion of the Basra refinery revamp by South Refineries Company in October 2025, resulting in the addition of a 34,500 b/d fluid catalytic cracking (FCC) unit and a 55,000 b/d vacuum distillation unit (VDU), which tremendously widened the capacity for the conversion of residues into distillates.
The Iraq vacuum bottom residue (kerosene, VGO and bitumen) market progression did not stop there, as in June 2025, the Oil Minister of Iraq declared that once the Basra new FCC complex is operational, Euro-V compliant gasoil production would be the first to start, followed by high-octane gasoline production. The project is, in fact, aimed at both import reduction and increasing the local production of clean fuels.
Together, these events point to the regulatory framework and processing upgrade as the twin forces that molds the refining sector in Iraq. The capital expenditures directed toward FCC, hydrotreating, and vacuum units are the enablers of the liberalization of the vacuum residues to reach the higher-value products like kerosene, VGO, and low-sulfur diesel. In that way, Iraq not only boosts its domestic market, but it also reduces its import dependence and makes itself ready to compete in regional clean-fuel industry.
Base Year
Historical Period
Forecast Period
Compound Annual Growth Rate
8.6%
Value in USD Million
2026-2035
*this image is indicative*
The Iraq vacuum bottom residue (kerosene, VGO and bitumen) market is becoming more and more active as refinery modernization is speeding up, in particular with those large-scale upgrades that are aimed at increasing the deep-conversion throughput. One of the major milestones was the massive EPCC contract awarded to JGC Holdings for the Basra refinery project, which comprises the erection of a 55,000 b/d vacuum distillation unit. This expansion, which was confirmed by JGC, thus is a direct move towards strengthening Iraq's capability to handle heavier crude fractions. By growing VDU capacity, the country makes good its output of vacuum residue, hereby allowing a higher production of VGO and bitumen and at the same time not compromising on the long-term downstream growth.
International financing supports the Iraq vacuum bottom residue (kerosene, VGO and bitumen) market expansion. Citing an instance, in November 2024, Iraq received JPY 60.04 billion ODA loan from JICA to upgrade the Basra Refinery project, which is basically a concentration on the installation of FCC and deep-conversion units. The injection of money expedites the installation of the necessary advanced units needed for vacuum bottoms treatment, at the same time solving the problem of a capital shortfall that is critical for this area. All these facts were notified in a formal document by JICA and it opens the way for Iraq to increase VGO yield, lessen its dependence on the use of low-value fuel oil and at the same time modernize downstream infrastructure according to the cleaner fuel standards.
Capacity building in terms of technical skills has been prioritized by the companies operating in the Iraq vacuum bottom residue (kerosene, VGO and bitumen) market, for the efficient handling of residues. In February 2025, JGC received the green light for a new technology transfer project from South Refineries Company that is aimed at supporting startup, operational stabilisation and workforce training for the Basra refinery upgrade. JGC made the announcement public. This cooperation is an additional step towards Iraq's operational readiness where it is guaranteed that new VDU and FCC units will be under proper management. The local community being more competent allows refineries to better utilise the conversion of vacuum residues into VGO, kerosene, and bitumen thus creating market sustainability in the long run.
One of the major market drivers boosting the Iraq vacuum bottom residue (kerosene, VGO and bitumen) market revenue is the growing need for strengthening on-ground refinery infrastructure, especially as Iraq is going to have to integrate more deep-conversion capacity. In July 2025, the Turkish engineering company Tekfen finished a USD 25 million civil and underground works contract for the Basra refinery upgrade, thereby laying down the necessary foundations for new processing units. The medium- and underground project works for the Basra Refinery were completed by MEED reporting. This progress was reported by MEED. Such infrastructure is what keeps advanced units like the VDU and FCC, thus it is providing the safety of installation, stability of operation and, of course, higher throughput of vacuum residues. These units together raise the refining Iraq’s efficiency and make the country able to increase the output of their refineries further.
The growth of the Iraq vacuum bottom residue (kerosene, VGO and bitumen) market, is attributed to the increased use of cutting-edge conversion technologies which has enabled Iraq to achieve higher conversion levels of heavy residues to valuable products. Axens is to provide a package of technologies that covers VGO hydrotreating, VGO FCC, and oligomerisation (Polynaphtha) for the Basra Refinery Upgrading Project. The agreement was publicly announced. Although the project was already in the past, it setill marks a major development in the current upgrades through 2023–2025. These kinds of technologies deepen one’s conversion, improve product quality and make fuels meet the necessary standards.
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The EMR’s report titled “Iraq Vacuum Bottom Residue (Kerosene, VGO and Bitumen) Market Report and Forecast 2026-2035” offers a detailed analysis of the market based on the following segments:
Market Breakup by Segment
Key Insights: The Iraq vacuum bottom residue (kerosene, VGO and bitumen) market growth is largely influenced by increasing activities in its three main segments - kerosene, vacuum gas oil (VGO), and bitumen, which are each driven by different demand trends and refinery-level upgrades. Kerosene is gaining from the rising output of middle distillates as Iraq is upgrading its major refineries. This is evident from the government's decision to stop the import of kerosene, gasoline, and gas-oil as the domestic production is getting better, which is also supported by new conversion capacity.
VGO production is getting higher as refiners are going for more profound conversion technologies, mainly fluid catalytic cracking (FCC) and hydrotreating units, which enable the change of residue into lighter and more valuable fuels. The end of the Basra refinery upgrade, which resulted in the addition of a 55,000 b/d VDU and a 34,500 b/d FCC unit, is a good example of this transition.
Furthermore, Bitumen is seeing significant demand in the Iraq vacuum bottom residue (kerosene, VGO and bitumen) market is still on the rise as a result of Iraq's massive road and reconstruction projects, which has the effect of refiners being encouraged to optimise residue routing for asphalt-grade production. Together, these changes signal how the growth of each segment is being determined by the expansion of the infrastructure, the modernization of the refinery and the technology partnerships.
By segment, kerosene registers robust growth
Demand for cleaner middle-distillate streams keeps kerosene-linked refinery outputs attractive, particularly as regional plants are increasing their large-scale hydro skimming and conversion capacity. The increased use of aviation and more stringent sulphur controls are the main factors for refiners to upgrade crude-processing units that have the effect of increasing kerosene recovery rates. A pertinent case is Al-Zour refinery, Kuwait, which for the first time in February 2024, went through a full operational capacity, thereby raising its middle-distillate slate, inclusive of kerosene and jet fuel. Such regional transitions, thus, indirectly spill over to Iraq by enhancing export opportunities in the Iraq vacuum bottom residue (kerosene, VGO and bitumen) market and speeding up the investment of cleaner-burning kerosene production.
The growing Iraqi bitumen demand is a consequence of ongoing road-building programmes and the Middle Eastern residue-processing capacities that are surging demand and hence refiners are being motivated to take the plunge on deeper-conversion units that will stabilise long-residue outputs. Industry players are directing their efforts mostly towards vacuum residue upgrading, thermal cracking, and blending technologies in order to obtain uniform paving-grade bitumen. One of the significant regional developments in the Iraq vacuum bottom residue (kerosene, VGO and bitumen) market is Bahrain's launch of the Bapco Modernisation Programme in 2024, which not only extends the efficiency of residue-processing but is also a source of higher-value heavy-product yields. Such large-scale modernization projects help to strengthen supply consistency and act as a pointer for the industry that is getting more and more focussed on residue-derived segments like bitumen.
The various Iraq vacuum bottom residue (kerosene, VGO and bitumen) market players that make up the vacuum-residue value chain in the Iraqi market are accelerating their investments in the modernisation of the refinery, the adoption of deeper-conversion technologies, and the implementation of long-residue optimisation strategies. To increase the yields of kerosene, VGO, and bitumen, companies are expanding vacuum distillation capacities, adding FCC and hydrocracking units, and upgrading heavy-oil handling facilities. These moves are very much in line with the cleaner-fuel regulations and the necessity for more efficient residue utilisation. Through improvements in processing depth as well as operational reliability, refiners are set to not only raise product quality levels but also increase domestic supply and make export activities more competitive.
Refiners as well as private operators in the Iraq vacuum bottom residue (kerosene, VGO and bitumen) market landscape focus on long-term efficiency initiatives and value the importance of digitally monitoring the process, optimising catalyst performance, and specially training the workforce. The strategic partnerships with worldwide engineering, licensing, and EPCC companies are allowing the implementation of advanced processes and a more stable operating environment. Meanwhile, domestic businesses are also developing storage, transport, and logistical facilities for smooth vacuum-residue flows. On the whole, these measures are the main drivers of the downstream sector's resilience, which in turn, is reaffirming the growth potential of the kerosene, VGO, and bitumen segments.
Wataniya Group is a diversified Iraqi conglomerate engaged in petroleum trading, refining support services, logistics, and infrastructure development. Established in the early 2000s and headquartered in Baghdad, the company has expanded its footprint across multiple energy-related operations, supporting Iraq’s downstream supply chain.
Majd al-Iraq Company operates as an integrated energy and industrial services provider, supplying refinery equipment, construction capabilities, and heavy-oil handling solutions. Founded in the mid-2000s and based in Basra, it plays a growing role in supporting refinery upgrades and residue-processing projects, and has emerged to be a leading player in the competitive landscape of the Iraq vacuum bottom residue (kerosene, VGO and bitumen) market.
Phoenix International A/S is a Denmark-based engineering and industrial solutions provider specialising in equipment supply, modular construction, and project execution for oil and gas facilities. Established in 2005 and headquartered in Copenhagen, the firm is increasingly involved in supplying advanced systems for Middle Eastern refining projects.
Halabja Group is a Kurdistan-based diversified enterprise involved in fuel distribution, construction materials, logistics, and refinery operations. Founded in the 1980s and headquartered in Sulaymaniyah, the group has steadily expanded its energy portfolio, supporting regional bitumen, fuel, and vacuum-residue supply.
*Please note that this is only a partial list; the complete list of key players is available in the full report. Additionally, the list of key players can be customized to better suit your needs.*
Other players in the market include Lanaz Refinery, among others.
Explore the latest trends shaping the Iraq Vacuum Bottom Residue (Kerosene, VGO, and Bitumen) Market 2026-2035 with our in-depth report. Gain strategic insights, future forecasts, and key market developments that can help you stay competitive. Download a free sample report or contact our team for customized consultation on Iraq vacuum bottom residue (kerosene, VGO, and bitumen) market trends 2026.
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*While we strive to always give you current and accurate information, the numbers depicted on the website are indicative and may differ from the actual numbers in the main report. At Expert Market Research, we aim to bring you the latest insights and trends in the market. Using our analyses and forecasts, stakeholders can understand the market dynamics, navigate challenges, and capitalize on opportunities to make data-driven strategic decisions.*
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The market is projected to grow at a CAGR of 8.60% between 2026 and 2035.
Key strategies driving the market include include large-scale refinery upgrades that expand deep-conversion capacity, increased collaboration with global technology licensors for FCC, hydrotreating and VDU systems, adoption of digital and operational efficiency tools, and strengthened partnerships with international EPCC contractors to accelerate project execution and improve residue-to-distillate yields.
Growing use of kerosene to power jet engines of aircraft and the expanding automotive industry are the key industry trends propelling the growth of the market.
The key players in the market include Wataniya Group, Majd al-Iraq Company, Phoenix International A/S, Halabja Group, Lanaz Refinery, and others.
Kerosene is less refined and is more similar to diesel fuel. Higher temperatures won't cause it to evaporate due to which combustion is more difficult than it is with gasoline. As a result, kerosene is not used as an automobile fuel.
The substance acquired during vacuum distillation is known as vacuum residue. Vacuum distillation is the process of separating chemicals with different boiling points while lowering pressure below atmospheric pressure. Under low pressure, crude oil is distilled to produce vacuum residue, which is a solid.
Vacuum distillation residue (VR) is the by-product of crude oil distillation that contains high molecular weight PAH, asphaltene components, and waxes.
The primary applications of bitumen are road building and roofing, among others.
In 2025, the Iraq vacuum bottom residue (kerosene, VGO And bitumen) market reached an approximate value of USD 3113.02 Million.
The Iraq vacuum bottom residue (kerosene, VGO And bitumen) market faces challenges such as ageing refinery infrastructure, delays in project execution, limited storage and transport logistics for heavy residues, high capital requirements for deep-conversion units, and persistent dependence on external financing and foreign technology, which can slow the pace of modernisation and reduce operational flexibility.
Explore our key highlights of the report and gain a concise overview of key findings, trends, and actionable insights that will empower your strategic decisions.
| REPORT FEATURES | DETAILS |
| Base Year | 2025 |
| Historical Period | 2019-2025 |
| Forecast Period | 2026-2035 |
| Scope of the Report |
Historical and Forecast Trends, Industry Drivers and Constraints, Historical and Forecast Market Analysis by Segment:
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| Breakup by Segment |
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| Market Dynamics |
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| Competitive Landscape |
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| Companies Covered |
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