In its Middle East Projects Forecast & Review 2011 report, MEED Insight says Kuwait will be one of the major growth markets in the region over the next two years, primarily due to the long-delayed new refinery and clean fuels projects finally coming to fruition.

On 27 June, Kuwait’s Supreme Petroleum Council (SPC), the country’s highest oil sector decision-making body, signed off on plans for the re-tendered New Refinery Project (NRP) and the Clean Fuels Projects (CFP), two schemes worth more than an estimated $30bn.

State-refiner, Kuwait National Petroleum Corporation (KNPC) has had to wait for SPC approval before it can launch tenders. Officials at KNPC said in May the construction of the NRP will be prioritised. Over the coming year, it plans to tender nine separate engineering, procurement and construction packages for its planned retender of the $15bn NRP. Five contracts were awarded in 2008, but were cancelled in 2009 before construction had begun. Tenders could be launched now by mid-2012.

“The announcements in Kuwait will come as welcome news to the international contractors,” says a source from an international engineering contractor. “These are major projects and anyone who is going to miss out on the large schemes in Saudi Arabia will be now be looking to win something in Kuwait.”

However, if the NRP proceeds, sources close to KNPC say the scope might be changed, with output reduced to about 500,000 barrels a day (b/d) from the originally planned 615,000 b/d following a recommendation by the SPC’s technical panel. The new plan must still be approved by the Oil Ministry.

The reduction comes after concerns that Kuwait will struggle to meet its target of increasing crude oil production to 4 million b/d by 2020 from less than 3 million b/d currently. State-upstream operator KOC will be responsible for the bulk of the increase, up to 3.65 million b/d, with the remainder coming from operations in the divided zone with Saudi Arabia.

Under Kuwait’s constitution, it is illegal for foreign companies to own any of its natural resources, making traditional production sharing agreements impossible to use. This leaves enhanced technical service agreements (ETSA) as the only way forward.

UK-Dutch oil major Shell Group became the first international oil company to sign such a deal in Kuwait in February 2010, worth an estimated $800m. Under the five-year deal, Shell will help KOC develop and manage its 13 trillion cubic feet of technically complex reserves in the northern Jurassic gas fields (MEED 14:4:10).

France’s Total followed in October 2010, signing a considerably smaller $27.6m deal to help develop heavy oil deposits in the northern Adbali, Ratqa, Raubhatain and Sabriyah fields.

MEED Insight’s forecast comes with a major caveat: that the various authorities and politicians can agree on the way forward. There is little sign that this is happening.

On 29 June, parliament launched an enquiry into Shell’s ETSA prompted by complaints in parliament over the budget of KOC’s parent company, Kuwait Petroleum Corporation (KPC), which was approved on 28 June by a parliamentary committee. The probe is an indication of the political opposition which the refining deals may once again face.