The estimated $35bn-worth of refining and petrochemical projects that Kuwait is pursuing at home hold the key to its downstream ambitions.
Kuwait is running a tight race with Saudi Aramco and the UAE’s Abu Dhabi National Oil Company (Adnoc) to expand its presence in the global downstream oil and gas sphere.
Like its neighbours, state energy body Kuwait Petroleum Corporation (KPC) and its overseas energy investment-focused subsidiary Kuwait Petroleum International (KPI) have made strategic investments in projects abroad that not only secure offtake for Kuwaiti crude, but will also yield good returns for a prolonged period.
However, it is Kuwait’s estimated $35bn-worth of refining and petrochemicals projects that are central to the country’s ambition to position itself as a dominant downstream oil and gas stakeholder in the Middle East and North Africa energy sector.
A core component of KPC’s 2040 strategic blueprint is to augment the country’s refining capacity to 1.4 million barrels a day (b/d) by 2020, from about 615,000b/d currently. To achieve that goal, Kuwait is working on two vital refining megaprojects.
Boosting capacity
Under the $12bn Clean Fuels Project, undertaken by KPC’s downstream subsidiary KNPC in 2014, Kuwait’s two existing refineries, Mina al-Ahmadi (MAA) and Mina Abdullah (MAB), are being combined and modernised, while the outdated Shuaiba refinery has been decommissioned.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe project aims to integrate the MAA and MAB refineries into a single complex, as well as add new units to improve the quality of products. A key addition has been a new 73,000b/d low-sulphur diesel unit at the MAB refinery, representing 40% of the new diesel production from the project, which reportedly began operation in December last year.
“The idea behind integrating the Mina al-Ahmadi and Mina al-Abdullah refineries to achieve more and environmentally friendlier refined fuel grades was a logical one,” says Veena Pathare, senior editor at ICIS.
“That way, the company is able to meet the more stringent requirements set in some parts of the world such as Europe. With many countries moving towards tighter environmental norms, Kuwait’s Clean Fuels Project is ready and geared up for this upcoming market. Greater operational efficiency and flexibility comes as a package,” she says.
The Clean Fuels Project is in its final stage of execution. Once complete, Kuwait’s crude refining capacity will be boosted to just over 936,000b/d, from 736,000b/d currently.
“Looking externally, many refiners, who operate multiple sites (some geographically distant), are seeking to integrate them to operate as a ‘single site’,” says Michael Connolly, senior consultant at ICIS. “This optimises logistics for feedstock and product supply, maximises unit utilisation and upgrading, and achieves the maximum return from assets.
“In the Middle East, Saudi Aramco and Orpic (of Oman) are good examples of companies transferring intermediates between sites to improve upgrading,” he says.
Moreover, KNPC has asked contractors to submit expressions of interest for a maintenance contract for the MAA refinery. The contract it is preparing to tender will be for a five-year period.
Al-Zour plans
Pivotal to Kuwait’s objectives of augmenting its downstream capabilities is its plan to create an integrated refining and petrochemicals zone in Al-Zour, which lies in the south of the country. KPC subsidiary Kuwait Integrated Petroleum Industries Company (Kipic) has been tasked with leading the megaproject, which is estimated to have an overall value of $25bn and will feature a refining complex and a petrochemicals plant.
Kipic is building a 615,000b/d greenfield refinery at Al-Zour. The $13bn project consists of five main packages. The engineering, procurement and construction (EPC) contracts were awarded during the second half of 2015, and contractors started work on their respective packages towards the end of that year.
The project is due for completion in 2020 or 2021. EPC contractors are understood to have completed more than 80% of the works on the refinery megaproject.
Separately, Kipic is also looking to tender a contract for maintenance services, for a period of five years, for two packages on the Al-Zour refinery known as Block 1 and Block 2 – relating to the refinery’s process units and utilities.
To further build on Kuwait’s refining capacity, KNPC is carrying out a study on the construction of a new refining complex, says the company’s CEO Muhammad al-Mutairi. The new refinery will likely be of a similar size and scope to the upcoming Al-Zour refinery, and will allow Kuwait to achieve a refining output exceeding two million b/d.
Kuwait has previously announced plans for two new 300,000b/d refineries, one to be built by 2025 and the second by 2035, although not much is known about these proposed projects.
Gas processing also features in KNPC’s new plans, with studies under way for two new gas fractionation trains by 2025. These will be Kuwait’s sixth and seventh trains and will take its total gas processing capacity to 3.7 billion cubic feet a day (cf/d).
Kuwait has four fractionation trains at the MAA refinery with a total processing capacity of about 2.5 billion cf/d. The fifth gas train is being built by Spain’s Tecnicas Reunidas under a $1.45bn contract awarded in 2015. Due for completion late this year, the train will take Kuwait’s capacity to more than three billion cf/d.
Petrochemicals venture
On the petrochemicals side, Kipic is working to establish a massive petrochemicals-producing facility at Al-Zour, estimated to cost $10bn. It will use feedstock from the nearby Al-Zour refinery to churn out nearly 2.7 million tonnes a year (t/y) of aromatics and polypropylene when commissioned in late 2024.
Several contractors submitted prequalification (PQ) documents in December last year for two packages of the Al-Zour petrochemicals project. The first related to the construction of gasoline and aromatics units, while the second covered construction of an olefins unit, as well as services utility units. The two packages are estimated to be worth $4bn each.
Despite firms having submitted PQ documents in December 2018, sources indicate they will have to wait until early 2020 for Kipic to issue the much-anticipated EPC tenders for the Al-Zour petrochemicals project. Kipic is said to be making modifications to the project’s feed to make it commercially more feasible and yield greater value, which is supposedly delaying the issue of the EPC tenders.
However, Connolly says further delay will not significantly impact the project’s potential. “They have licensors lined up,” he says.
The petrochemicals project includes a 50,000b/d residue fluid catalytic cracking (RFCC) complex with ethylene and propylene recovery, a 24,000b/d gasoline desulphurisation unit and two units to treat propane for propylene production.
The plant is set to produce a million t/y of polyethylene and 400,000-600,000t/y of polypropylene.
UK-based Wood Group is executing the front-end engineering and design (feed) work, and is also the project management consultant for the scheme.
“Achieving success for Middle Eastern petrochemical projects over a period of time is almost a given, considering the feedstock advantage they possess,” Pathare says.
Furthermore, KPC’s CEO Hashem Hashem is studying the prospect of building a fourth petrochemicals complex in Kuwait to produce plastics such as polypropylene.
“We are currently moving ahead with our integration plan at Al-Zour refinery, to include Olefins-3 and Aromatics-2. Further, we are also assessing building Olefins-4 in Kuwait,” Hashem recently said at an industry event, without providing details.
Global downstream footprint
Overseas, KPC is endeavouring to establish itself as a major player in the dynamic global refining and petrochemicals space. “Kuwait has already started taking steps in this direction, through joint ventures such as the Nghi Son project in Vietnam with regards to PP [polypropylene],” Connolly states.
“So KNPC and Kipic/Al-Zour are poised to expand their product portfolio. KPC has also built relationships in China, with its new Sinopec/KPC refinery coming online next year, establishing an even stronger foothold in this key region,” he says.
KPI’s acquisition of half the stake in the strategic Duqm refinery and petrochemicals complex in Oman, in February 2018, is perhaps its boldest overseas investment so far.
Once completed in the fourth quarter of 2022, the $7bn Duqm refinery will have the capacity to process about 230,000b/d. As part of the joint-venture agreement, the refinery will process Kuwaiti crude oil, providing an important strategic outlet for Kuwait’s crude.
MEED has also reported that the joint venture of KPI and the local Oman Oil Company is close to awarding a feed contract for the estimated $9bn Duqm petrochemicals plant, for which Wood Group has emerged as a frontrunner.
Outside the Gulf region, KPI has a 35.1% share in the $9bn Nghi Son refinery in Vietnam. The complex started full commercial operations in the last quarter of 2018, and has a refining capacity of 200,000b/d. As per the project agreement, the refinery is designed to process 100% Kuwaiti crude.
KPC signed a key agreement with Chinese downstream major Sinopec in October 2018 to invest in a stake in the Zhanjiang refinery and petrochemicals complex in southern China, which has a planned capacity of 300,000b/d.
KPI is also understood to be in talks to buy a 24% stake in a joint-venture refinery in central India, which would have the capacity to process 120,000b/d.
Separately in Canada, KPC subsidiary Petrochemicals Industries Company (PIC) and local firm Pembina Pipeline have also taken a final investment decision to proceed with their jointly owned integrated petrochemicals project in the province of Alberta, estimated to be worth $3.43bn. The project is scheduled for completion by mid-2023.
“Kuwait is already an established producer for products such as ethylene and polyethylene,” says Pathare. “So it won’t take too much effort to reinforce its position as a global player, and foray into newer products/markets as long as it is clear on the markets it wants to enter into, and has specific strategies for each.”
This article is sourced from Power Technology sister publication www.meed.com, a leading source of high-value business intelligence and economic analysis about the Middle East and North Africa. To access more MEED content register for the 30-day Free Guest User Programme. https://www.meed.com/registration/
