Competition for Kuwait refineries starts

01 May 2012

Prequalification begins for new refinery and clean fuels scheme. Kuwait yet to decide whether to prioritise one project over the other

The launch of Kuwait’s two major downstream projects, worth an estimated total of $30bn is welcome news to anyone working in the country’s engineering and construction sectors, but it does raise several questions.

Engineering, procurement and construction (EPC) firms have until 13 June to submit prequalification documents for the New Refinery Project (NRP) and the Clean Fuels Project (CFP). The schemes are part of Kuwait’s plans to increase refining capacity to 1.4 million barrels a day (b/d) from the current 956,000 b/d by 2018.

The prequalification process for both projects started on the same day, but state-owned Kuwait Petroleum Corporation (KPC) could still prioritise the development of one project over the other. It could also try to press ahead with both, despite concerns the country will struggle with the logistical burden. Each scheme will require at least 100,000 skilled labourers at the peak of construction, say contractors in the country.

State-refiner Kuwait National Petroleum Company (KNPC) appears not to have made that decision yet, with management teams for both projects lobbying for their scheme to take priority. After all, each has a compelling case.

The managers of the CFP will tell KPC that Kuwait is falling behind its neighbours and is increasingly locked out of lucrative international advanced fuels markets. Meanwhile, the 615,000 b/d refinery at Al-Zour port in the south of Kuwait would be the largest in the Middle East and is designed to produce low sulphur fuel oil for power generation. Managers for the fourth refinery will point to the need for more fuel oil to feed Kuwait’s struggling power sector.

In mid-June, KNPC will announce the firms eligible to bid on the projects. It will be interesting to see if they will be allowed to bid on both. South Korean firms won three out of the four EPC contracts offered when the NRP was first launched in 2006, and three out of five deals in its second tender in 2008. Local EPC firms now have a third opportunity to challenge South Korea’s dominance in Kuwait.

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