EXCLUSIVE: Kuwait’s New Refinery Project faces delays

14 December 2017
Sources expect the project to be completed a couple of years late

Kuwait’s $17bn New Refinery Project is expected to be completed a couple of years late according to a senior industry source that is familiar with the project.

“The Al-Zour New Refinery Project is going to be a couple of years late – that’s for sure,” said the source. “All of the companies are pointing the finger and blaming each other. It’s very likely that this is going to go to court.”

State owned oil company Kuwait Petroleum Corporation (KPC) did not respond to requests to comment on the alleged delays on the New Refinery Project.

The main engineering, procurement and construction (EPC) contracts for the New Refinery Project were awarded in mid-2015, and are all currently under execution.

State-owned Kuwait Integrated Petroleum Industries Company (KIPIC) is the project owner and, according to the official schedule, the scheme is due to be completed before the end of 2019.

It is hoped the project will ultimately lead to the construction of the Middle East’s biggest refinery: a 615,000 barrel-a-day (b/d) facility constructed near Kuwait’s border with Saudi Arabia.

If the problems with the project are not resolved and the scheme is delayed “by a couple of years” as the source indicates it will deal a major setback to the Kuwait’s downstream strategy as well as the country’s wider economic strategy – as it positions itself to capitalise on rising regional demand for refined products.

In February this year Kuwait’s Ministry of Finance said that petrochemicals and refineries were the focus of state investments and considered essential to create new jobs and support medium-term refining targets.

Currently Kuwait is targeting a refining capacity of 1.4m b/d by 2020 – a target it will not hit if the Al-Zour Refinery sees major delays.

Major delays to the Al-Zour New Refinery Project will also have major ramifications for other megaprojects planned in the country, including the planned petrochemicals plant that is due to be built on the Al Zour site and integrated with the refinery.

The front end engineering design (feed) contract for the petrochemical plant was signed in January 2016 and is expected to be completed by the end of June 2018.

The packages that are currently under execution as part of the Al-Zour New Refinery Project are:

  • Package 1 - $4.1bn - Joint venture of Tecnicas Reunidas, Sinopec, Hanwha
  • Package 2 - $2.9bn – Joint venture of Fluor, Hyundai Heavy Industries, Daewoo Engineering
  • Package 3 - $2.9bn – Joint venture of Fluor, Hyundai Heavy Industries, Daewoo Engineering
  • Package 4 - $1.5bn – Joint venture of Saipem, EssarPackage 5 - $1.5bn – Joint venture of Hyundai E&C, Saipem, SK E&C
  • Feed pipeline - $0.9bn - Saipem

 

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