Iraq's largest oil refinery shut by bombing

BAIJI, Iraq (Reuters) - Militants attacked and shut down Iraq's largest oil refinery on Saturday, killing four workers and setting off bombs near production units that started a raging fire, officials said.

The militants planted explosives at kerosene and benzene units at the refinery in the town of Baiji, a former al Qaeda stronghold about 180 km north of Baghdad, the governor of Salahuddin province, Ahmed al-Jubouri, said.

"The refinery has completely stopped," Jubouri told Reuters. "It's a big loss for the whole country. All Iraqi cities depend on its production."

The blast, which happened before dawn, sparked a fire that was later brought under control, a police source said. It took about five hours and up to 50 fire trucks to contain the blaze.

The units that were damaged by the attack have a production capacity of around 150,000 barrels per day, a Baiji official said, adding the damage has been too severe to fix in few days.

"Fixing the damage will take long time. We are not talking about days, the damage is too severe," said the Baiji official, who asked not to be named.

"Hopefully in the next few days we can partially restart the refinery," he said, adding that the plant has enough stock to cover domestic needs for at least seven days.

Iraq does not export any oil products as it uses all of its production for power generation and domestic consumption.

The country's capacity to refine fuels like diesel and gasoline has been ravaged by underinvestment, and it has been forced since the 2003 U.S.-led invasion to buy imported fuels to meet the growing gap between supply and domestic demand.

Baghdad has signed multi-billion deals with international oil companies to boost output capacity to 12 million barrels a day in seven years, rivalling top oil exporter Saudi Arabia.

But everything depends on whether the OPEC member can secure its vital oilfields, refineries and other infrastructure against insurgents and militia that have plagued the country since the invasion.

Overall violence in Iraq has dropped sharply since the peak of sectarian conflict in 2006-07 but attacks still occur on a daily basis.

The Baiji refinery was controlled for a long time by al Qaeda militants, who used it to finance the insurgency.

Baiji normally operates at 70 percent of its capacity and produces 11 million litres of gasoline, 7 million litres of benzene and 4.5 million litres of kerosene a day. The refinery was last shut in August for two days due to an electrical fault.

Iraq has eight oil refineries with a capacity of 659,000 bpd. It produces about 453,000 bpd of refined products and uses 589,000 bpd, according to the OPEC website.

(Additional reporting by Ahmed Rasheed in Baghdad; writing by Rania El Gamal and Jim Loney; Editing by Angus MacSwan)