Kuwait Prime Minister Sheikh Nasser Al-Mohammed al-Sabah, said on 15 March the project had been cancelled after an investigation over the way contracts were awarded by the client, state-owned Kuwait National Petroleum Company (KNPC).

Local sources confirm that the decision has been made to cancel the project and say that an official announcement will be made during the 16 March parliamentary session.

The new 615,000 barrel-a-day (b/d) refinery, which was to be the country’s fourth, would have been the largest ever built in a single phase.

“It has been scrapped,” says Kamel al-Harami, an independent oil and gas analyst in Kuwait. “That’s definite, there is no question about it.”

Al-Harami says an investigation by Kuwait’s State Audit Bureau (Sab) into the way contracts were awarded revealed “violations of the law” that made it impossible for the project to continue.

Kuwait has strict laws regarding contracts awarded by state bodies, requiring the tendering process to be conducted through the Central Tenders Committee, with every stage published to allow for transparency.

This is particularly important in the case of the country’s highly politicised oil and gas sector. Under Kuwait’s constitution, only the state is allowed to profit from the country’s natural resources.

International contractors who won contracts for work on the new refinery in April 2008 (MEED 18:5:08) tell MEED they have not been informed of the decision to scrap the project.

“Until now we have not received any official notice,” says an executive at one international firm working on the project. “We expect to hear this afternoon or tomorrow morning [17 March].”

“We haven’t been told it has been cancelled,” says another senior executive. “I don’t think it is the case and we will be very disappointed if it is.”

The Kuwait government cancelled another major downstream deal, for the formation of a $17.4bn petrochemicals joint venture, K-Dow, with the US’ Dow Chemical Company in December 2008 (MEED 29:12:09).

International executives have since called into question, Kuwait’s ability to pass through major hydrocarbons projects, considering ongoing internal political wrangling (MEED 18:1:09).

Neither KNPC or the Kuwaiti government were available for comment at the time of writing.