KNPC presses ahead with projects worth $40bn

15 March 2016

With a surge of recent awards, KNPC is Kuwait’s most active client

Kuwait National Petroleum Company (KNPC) is the organisation responsible for Kuwait’s downstream oil and gas operations. Established in 1960, it was the first state-owned downstream operator in the region, building the Shuaiba refinery, which began production in 1968, and expanding it to 180,000 barrels a day (b/d) by 1975.

The firm’s activities grew when it took ownership of the US-built Mina Abdullah refinery in 1978. The state’s third refinery, Mina al-Ahmadi, was passed over to KNPC from Kuwait Oil Company as part of the sectoral restructure in 1980. This restructure also saw the creation of Kuwait Petroleum Corporation as a holding company for all of the state energy companies.

Busy period

Today KNPC is led by chief executive Mohammed Ghazi al-Mutairi, a long-term employee of KNPC and a chemical engineer, who joined the organisation in 1987 and has worked at all three of its refineries. A surge of contract awards in 2014 and 2015 are sure to keep him occupied as construction gets under way on the long-awaited Al-Zour refinery and the enormous upgrade project for Mina Abdullah and Mina al-Ahmadi, a scheme also known as the Clean Fuels Programme.

Five EPC contracts worth $13bn were signed [on the Al-Zour refinery scheme] this October

Regional projects tracker MEED Projects estimates that the company has projects of about $40bn planned or under way, and $34.6bn of these are under execution, making the company the most active client in Kuwait.

The highest-profile project under development by KNPC today is the 615,000-b/d Al-Zour refinery scheme, which was first announced in 2005. After years of delays and false starts, five engineering, procurement and construction (EPC) contracts worth $13bn were signed this October. The winners of packages one, two, three and five, worth a total of $11.5bn, were named on 28 July by Kuwait’s Central Tenders Committee, but the final contract signing was made in October.

Key KNPC projects
ProjectBudget ($m)StatusAward yearDue
Clean Fuels Project 2020: Mina Abdulla (package 1)5,300Execution20142018
Clean Fuels Project 2020: Mina Abdulla (package 2)5,300Execution20142018
Clean Fuels Project 2020: Mina al-Ahmadi (package 3)4,700Execution20142019
New Refinery Project: process plant (package 1)3,550Execution20152019
LNG import and regasification terminal3,315Main contract bid20162021
New Refinery Project: process plant (package 2)3,000Execution20152019
New Refinery Project: utilities and offsites (package 3)3,000Execution20152019
Mina al-Ahmadi refinery: gas fractionation train 51,500Execution20152018
Mina al-Ahmadi North LPG tank farm1,200Execution20112016
New Refinery Project: tankage (package 4)1,100Execution20152019
LNG=Liquefied natural gas; LPG=Liquefied petroleum gas. Source: MEED Projects

Package one consists of a process plant and has been awarded to a joint venture of Spain’s Technicas Reunidas, China’s Sinopec Engineering and South Korea’s Hanwha Engineering & Construction (E&C). Packages two and three were won by a joint venture of the US’ Fluor, and South Korean firms Hyundai Heavy Industries and Daewoo Engineering. Package five comprises marine facilities and was awarded to a consortium of South Korea’s Hyundai E&C with SK E&C and Italy’s Saipem.

The final EPC contract was awarded to a consortium of Italy’s Saipem and India’s Essar. However, it may not all be plain sailing from here as the project is situated in the Divided Zone shared with Saudi Arabia, and a dispute over land use remains one of the biggest issues yet to be resolved for Kuwait’s energy industry.

Refinery upgrades

To date, more progress has been made on the $15.5bn Clean Fuels Project aimed at upgrading and expanding the Mina Abdullah and Mina Al-Ahmadi refineries. This is the largest programme in the KNPC portfolio. The programme will upgrade the facilities, retire the existing Shuaiba refinery, and take production capacity at Mina Abdullah and Mina al-Ahmadi to 800,000 b/d from 736,000 b/d today.

Contracts worth $12bn were awarded in 2014 for the three main packages, two concerning Mina Abdullah and a single $4.8bn package for Mina al-Ahmadi. Construction began in January, and in July MEED reported that the scheme was 27 per cent complete.

Another major contract, to build a new $3.3bn liquefied natural gas (LNG) import and regasification terminal, is in the tender phases with 13 contractors prequalified to bid for the project. In September, MEED reported that the bid deadline had been pushed back into November after two bidders requested more time.

According to KNPC’s plans, the LNG regasification terminal will have a capacity of 1.5 trillion BTUs a day and will include two berths for the simultaneous unloading of large LNG carriers. The terminal will also include four full-containment LNG tanks.

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