Kuwait may seek private investors to help build its largest oil refinery after a government council revived the 4 billion-dinar ($14.5 billion) project, which stalled two years ago amid political opposition.
The Supreme Petroleum Council, the emirate’s highest decision-making body for oil policy, approved construction of the 615,000 barrel-a-day Al-Zour facility, Oil Minister Mohammad al-Busairy said today. The approval is “a very big step,” al- Busairy said in a telephone interview in Kuwait City. “We now have to follow all legal procedures to implement the project.”
The council authorized the plan yesterday, along with proposals to upgrade two of the country’s three existing refineries, Mina Al-Ahmadi and Mina Abdulla, so that they can produce cleaner-burning fuels, the minister said.
Kuwait suspended the Al-Zour project in March 2009 after opposition lawmakers said the government had circumvented the law in awarding contracts with foreign companies without going through the Central Tenders Committee.
The Gulf nation will seek a foreign partner for the new refinery, and “the public will own a minority share,” Kamel al-Harami, an independent oil analyst, said today by telephone from London. “This is the direction of the Kuwait parliament and government,” he said, echoing a view expressed earlier by some government officials.
Development Plan
“There may be some requirement to give a portion of it to the private sector,” the chairman of state-owned Kuwait Oil Co., Sami al-Rushaid, told reporters in London on June 22. The government is trying to attract more private investment to help it pay for costly industrial improvements and infrastructure as part of a 30.8 billion-dinar development plan that aims to boost energy output and modernize transport links.
In its first phase, the new refinery would be able to process 300,000 barrels a day of products for the domestic market, according to al-Harami. The second phase, for 315,000 barrels a day, would replace output from Kuwait’s oldest and smallest refinery at Shuaiba, which is planned for closure, and enable the country to be self-sufficient in refined products, the analyst said.
Once the Al-Zour facility is fully built, it should also have enough spare capacity to provide products for export, he said. Kuwait, which imports liquefied natural gas to supply its power plants when demand peaks in the summer months, should be able to reduce its imports of LNG and eventually stop them, al- Harami said.
Asian Contractors
Kuwait awarded construction contracts for the refinery in May 2008 to JGC Corp. (1963) of Japan and to South Korea’s GS Engineering & Construction Corp. (006360), SK Engineering & Construction Co., Daelim Industrial Co. and Hyundai Engineering & Construction Co. Fluor Corp. (FLR), based in Irving, Texas, won a consulting contract. The initial plan called for the refinery to start operating by 2012.
The facility may be formed as a public shareholding company to expand the role of private investors in the country’s economic development, the state news agency KUNA reported last July, citing the former minister for development, Sheikh Ahmad al-Fahad al-Sabah.
“I don’t expect anything will go ahead this year in Kuwait because the political situation is so unstable,” Thad Malesa, an independent energy analyst, said by telephone from Dubai. “Parliament will drag things out, frustrating any partners.”
Disputes between Kuwait’s legislative and executive branches have led to government resignations and halted other projects. Lawmakers’ objections contributed to the scrapping of a joint venture with Midland, Michigan-based Dow Chemical Co. (DOW), in December 2008.
Kuwait is the fifth-biggest producer in the Organization of Petroleum Exporting Countries, pumping 2.425 million barrels of oil a day in May, according to Bloomberg data. The country’s current refining capacity is 930,000 barrels a day.
