Contractors await Kuwait brownfield megaproject

20 February 2012

Kuwait’s Clean Fuels Project will be one of largest brownfield schemes in the Gulf if it gets prioritised by the Supreme Petroleum Council

In numbers

10,000: Number of workers on Kuwait’s facilities modernisation and upgrade project

4 million b/d: Kuwait’s target for crude oil production by 2020

b/d=Barrels a day. Source: MEED

As one of the region’s oldest hydrocarbons producers, brownfield projects have a long history in Kuwait. Responsibility for rehabilitation and maintenance lies with Kuwait Petroleum Corporation (KPC), a state-owned holding company, which manages all hydrocarbons-related activity in the country through its subsidiary operators.

The engineering challenge will be how to manage the bottlenecking [for the Clean Fuels Project]

Ibrahim Washash, Penspen Group

“You have to look at Kuwait as an ageing or mature market. A lot of the facilities suffer from corrosion, particularly upstream because of the high sulphur content of the crude. It needs assessment. KPC has its own teams for this,” says Ibrahim Washash, regional manager of integrity services in the Middle East for the UK’s Penspen Group.

One of Kuwait’s largest brownfield schemes was launched in 1999, when the Gulf state’s upstream operator Kuwait Oil Company (KOC) started the facilities modernisation and upgrade project (FMP).

Ageing infrastructure

The scheme aimed to raise output from the southeastern oil fields to a sustainable production capacity of 1.75 million barrels a day (b/d). Surface facilities in the area include 14 gathering centres, two gas compression and booster stations and two effluent water treatment plants.

Much of the country’s oil and gas piping networks have been in place since the facilities were first commissioned in the 1940s. In addition to increasing the oil and gas processing capacity, the FMP included replacing  underground pipelines with overground lines. The decision to do so was taken after a rupture in a high pressure underground pipeline led to a fire that caused extensive damage to the gathering centre and booster station. 

“The magnitude of the project demanded that the scope be based upon the facilities’ location and that it be divided between two contractors,” Sadoun al-Khaledi, KOC’s team leader for operations and technical services, told MEED’s Middle East Brownfield Upgrade & Development forum in Abu Dhabi late last year.

In 2005, KOC awarded two major EPC projects for the scheme. South Korea’s SK Engineering & Construction was awarded a $1.2bn contract, while the UK’s Petrofac secured a smaller $650m deal. The first contract was for eight gathering centres and a booster station in east and west Kuwait, while the second deal included seven gathering centres and two booster stations in the south and north of the country. Executed over 32 months, the project covered a number of brownfield sites with operating facilities.

Al-Khaledi set out the challenges faced by KOC’s project management team and the contractors on the project. KOC had to accommodate the execution of the work and the safe commissioning of the new facilities within live operating plants, said Al-Khaledi. The scheme involved more than 10,000 personnel working on the facilities.

To reduce the length of time operating facilities were shut down, common systems such as drains and utilities had to be identified. Work had to be completed on one section first, with the use of isolation valves and blinds. Gathering centres could then be shut down, while the second section was hooked up to existing plants and equipment.

“When section one works were completed, they were hooked up to the existing plant at the tie-in point isolation valves. This arrangement avoided another shutdown thus overcoming integrity issues,” said Al-Khaledi.

Raising oil production

Kuwait’s southeastern fields cover the greater Burgan reservoir, which contains an estimated 70 billion barrels of crude oil, more than half the country’s total reserves of 101.5 billion barrels. Output has fallen to 1.7 million b/d, from a peak of 2.4 million b/d in 1972. Without action, some analysts say levels could drop to as low as 1.5 million b/d by 2020.

Maintaining production from the reservoir will be an ongoing concern. In August 2011, KOC awarded South Korea’s GS Engineering & Construction an estimated $545m contract to build a new effluent water injection facility at the field by 2014. The scheme aims to pump as much as 1 million (b/d) of water into the Wara formation to maintain pressure and production levels at the Burgan field.

The facilities will comprise 10 water treatment units, 20 tanks, 60 pumps and up to 700 kilometres of pipelines, with diameters varying from 6-30 inches.

Elsewhere, Kuwait has been revamping and expanding its pipeline network to cope with planned extra production capacity. The country is aiming to raise oil production to 4 million b/d by 2020, from about 3.2 million b/d today. In 2005, Petrofac won a $52m contract from KOC to replace its northern crude oil export system. This involved building new branch lines from three gathering centres and a new 120km transit line from southwest Kuwait, as well as a new crude booster and export pumps.

Brownfield sections of the deal included pipeline pressure protection systems at each gathering centre and modifications to existing control systems.

Oil refining capacity

Kuwait currently has a refining capacity of 930,000 b/d. Although substantial, it is insufficient for the country’s requirement and the facilities need to be expanded and modernised. In its 2020 strategy unveiled in 2008, KPC outlined plans to expand refining capacity to as much as 1.5 million b/d by 2010. However, this target date has already come and gone.

Kuwait refining capacity
(Thousand barrels a day)
2000740
2001759
2002809
2003909
2004931
2005931
2006931
2007931
2008931
2009931
2010931
Source: BP

KPC has spent the past few years attempting to move ahead with one of the biggest brownfield projects in the region. The scheme involves a massive revamp of the country’s three refineries, bringing them up to international fuel standards at an estimated cost of $16-18bn.

The Clean Fuels Project (CFP) has faced a series of delays since it was announced. In late 2011, KPC looked like it would finally tender three engineering, procurement and construction (EPC) packages for the CFP to integrate two of Kuwait’s existing refineries at Mina al-Ahmadi and Mina Abdullah, while also retiring the older Shuaiba refinery.

The first package covers the upgrade and expansion of the Mina al-Ahmadi refinery, 50km from Kuwait City. The second package covers the Mina Abdullah refinery and the retiring of the older Shuaiba refinery. Shuaiba’s tank farm, offsites and marine facilities will be kept intact and integrated into the CFP project to reduce costs.

The tendering process has still not been finalised and EPC contractors in Kuwait hoping to bid on the work continue to speculate over the number of packages and the details of their scope. Demonstrating its commitment to the scheme, KPC has already purchased a number of long-lead time items and has even taken delivery of 14 reactors from India and Italy. The rest of the equipment will be procured by the EPC contractors. Once the scheme gets prioritised, it will be one of the most important brownfield projects in the region.

“There will be lots of interest from an integrity management point of view. Mothballing the Shuaiba refinery will be a big area for us. It is 40 or 50 years old. Penspen actually did the original project management when it was built,” says Washash.

It will also be a major challenge from a production perspective. With its ageing refining infrastructure, Kuwait has increasingly found itself locked out of advanced fuel markets because its products do not meet the latest environmental standards. 

Clean fuels project in Kuwait

Lighter and cleaner refined products present higher value. The CFP scheme aims to reduce Kuwait’s fuel oil production to 5 per cent of the total refined product mix, from the current 20 per cent. The CFP scheme will also reduce the sulphur content from 5,000 parts per million (ppm) to 10ppm on completion. Nonetheless, Kuwait will still have to produce fuels for domestic consumption and export during the construction period.

“The engineering challenge will be how to manage the bottlenecking. It will be a complex task of managing each unit’s shutdown and replacement; which facilities need to be operating to maintain production to meet domestic and export needs and what will need to be compensated for,” says Washash.

At the same time as looking to rehabilitate its existng refineries, Kuwait is working on plans to build a new $14.5bn refinery at Al-Zour. Although the Supreme Petroleum Council has approved both schemes, the huge manpower requirements could see one taking precedence over the other. Brownfield contractors will be hoping the CPF scheme moves ahead first.

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