Kuwait approves $2.6bn Al-Zour budget extension

23 June 2015

New Refinery Project spending increase given the green light

  • Budget extension increases the budget to between $14.95bn and $15.5bn
  • Project has seen delays since March, when prices were announced for the process packages
  • All bids for the project’s five unawarded packages came in over budget
  • Kuwait has warned the refinery will not become operational by early 2019 as was expected

An additional KD800m ($2.6bn) has been approved for the Al-Zour New Refinery Project (NRP), according to Mohammed Ghazi al-Mutairi, CEO of state-owned Kuwait National Petroleum Company (KNPC).

“We have obtained final approval from the board for the additional funds in the budget of the Al-Zour project,” said Al-Mutairi, speaking to Kuwait’s Arabic-language newspaper Al-Seyassah.

He said the extra funds extended the project’s total budget to a figure between KD4.6bn and KD4.8bn.

In 2006, KNPC gave the project a budget of $14bn.

The NRP has seen delays since March, when prices were announced for the scheme’s process packages, revealing that the low bids for the scheme’s five unawarded packages had come in $3.7bn over budget.

In the wake of these delays, KNPC spokesman Khalid al-Asousi has said the NRP will not become operational in early 2019 as was expected.

Confirmation from Al-Mutairi that approval for an expanded budget has been granted will increase optimism that contracts for the remaining packages will be awarded this year as planned.

However, the funds still need to be approved by Kuwait’s Supreme Petroleum Council, a government agency charged with oversight of the country’s energy sector. Contractors believe the ongoing dispute between state-owned Kuwait Petroleum Corporation (KPC) and the Oil Ministry is capable of derailing the project.

Kuwait’s Oil Minister Ali al-Omair and the CEO of KPC, Nizar Mohammad al-Adsani, are refusing to meet with each other on any issue.

At the heart of the dispute between Al-Adsani and Al-Omair are the latter’s plans for the Oil Ministry to nominate more members to the board of KPC, increasing his own influence over the country’s energy sector.

This move has been fiercely resisted by Al-Adsani.

Both Al-Adsani and Al-Omair hold seats on the Supreme Petroleum Council.

Sources say the stand-off threatens to freeze progress on all oil and gas projects that are yet to see contracts awarded.

The Al-Zour project is part of a plan to overhaul Kuwait’s refining sector, slash the sulphur content in its fuels and lift its refining capacity from 930,000 barrels a day (b/d) to 1.4 million b/d by 2020.

It will see a 615,000-b/d refinery constructed on a greenfield site in the Divided Zone, which is shared with Saudi Arabia and has a long history of delays and setbacks.

Since it was first announced in 2005, the scheme has been tendered three times. It saw contracts awarded on the second occasion, but they were cancelled before construction started by the Supreme Petroleum Council.

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